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Market Report
Autumn 2013
From caution til action
LEADER
From caution to action
Once again, we are able to report a good sales volume for Norway, with
approx. 100 sales for the year to date. If we include transactions in the
bidding/acceptance stage which are likely to be completed, the volume
has exceeded NOK 30 billion. Nevertheless, many are finding the
transaction market a little slow after the summer holidays. We know of a
high number of sales processes that have taken longer than expected and
investors are increasingly selective. Much of the demand has been focused
on well-located office properties. More specialised players have shown
strongly defined preferences. It is reasonably normal to encounter a
somewhat sluggish market and long decision-making processes in the third
quarter. And it is not inconceivable that there could be a large number of
transactions we have not yet picked up, or that the lack of billiontransactions is making the market appear more lacklustre than it has
actually been. We are in constant contact with many players and the vast
majority of them are involved in purchase/sales processes or considering
different properties. Investors have a lot to work on now compared with
the situation last winter, and they can be selective. However, we believe
that the stage is set for a well-functioning sales market in the fourth
quarter. This is because rental market expectations are positive, the loan
financing situation is satisfactory (some improvement during 2013) and
many processes are in progress. In addition, investors can be divided into
groups of buyers and sellers. Life insurance companies have sold many
quality properties and more will be in the process of selling. Norwegian
funds will be a clear net seller in the period ahead, with several attractive
properties heading for the market. We have registered 14 sale-leaseback
transactions so far this year and the property users have a good opportunity
to profit from the demand for reliable cash flows. Property companies are
active in purchasing and many are showing a preference for further
concentration within defined areas and segments. Syndicates are
contributing to the good dynamics in the Norwegian market by creating
many transactions on their own.
This includes tailoring solutions for buyers/sellers and identifying relevant
properties in private ownership. Syndicates have contributed to a
Norwegian transaction volume over the last 12 months that has matched
the Swedish volume when adjusted for population size. Sadolin Albæk's
transaction statistics for Denmark show that the volume in Norway has
been more than twice as high as that of our southern neighbour during the
last two years. The syndicates will continue to be net buyers and our
conclusion is that we expect the transaction market to move from caution
in the third quarter to action in the fourth.
The Norwegian economy and demand in the office rental market in the
Oslo area have been boosted by the oil sector. Several tenants related to
the offshore sector have decided to move as a result of increased space
requirements. In total for 2012/2013, completed office buildings for oilrelated tenants in Oslo, Asker and Bærum amount to approx. 150,000 m².
In the year to date, Lundin, Technip and Kvaerner have signalled that they
are moving, with the signing of leases corresponding to approx. 35,000 m².
However, we would add that the demand stimulus from oil-related tenants
will diminish in the period ahead, as a large number of the major players
have already acquired premises with room for growth. Forecasts for the
Norwegian economy have been revised downwards during the year and the
same applies to company optimism and staffing plans. In response, we have
revised down our estimates for both demand and new construction.
However, we expect a continuing decline in office vacancy and rising
market rent levels in the capital. On pages 26-28, we present our
assumptions and our scenario for the office rental market in Oslo, Asker
and Bærum for the coming years.
1/LEADER/PAGE 2
2/CONCLUSIONS/PAGE 4
3/MACRO/PAGE 6
4/TRANSACTION MARKET IN GENERAL/PAGE 10
5/TRANSACTION MARKET IN OSLO, AKERSHUS/PAGE 12
6/TRANSACTION MARKET AND KEY INFO FOR DIFFERENT PROPERTY SEGMENTS/PAGE 13
office/retail/logistics/hotel/residential
7/TRANSACTION MARKET IN BERGEN, TRONDHEIM, STAVANGER/PAGE 18
8/RETURN ON INVESTMENTS IN COMMERCIAL PROPERTY/PAGE 22
9/OFFICE RENTAL MARKET IN OSLO, ASKER, BÆRUM - GENERAL/PAGE 25
10/OFFICE RENTAL MARKET IN OSLO, ASKER, BÆRUM - BY AREA/PAGE 32
3
CONCLUSIONS, OCTOBER 2013
The transaction market (from NOK 50 million)
Office rental market – Oslo, Asker & Bærum
o
Three-quarters of the sales volume for the year to date is related to office
properties, shopping centres and residential-related transactions.
o
o
We have registered 63 different buyers so far this year, including some
newly established property companies.
Office vacancy in Oslo, Asker and Bærum is now 6.6%. The level has been
falling slowly since last autumn, when it peaked at 7.3%. As at September,
there are 721 vacant office premises.
o
o
Our expectations for 2013 are that the property companies and syndicates
will continue to be the biggest net buyers, while Norwegian funds, property
users and life insurance companies will be net sellers.
Office vacancy rates vary from approx. 5% in the central areas to 10-12% in
the fringe areas in the north, east and south. We expect that low vacancy in
the centre and its surrounding areas will eventually spread to the fringe
areas.
o
Including transactions in the bidding/acceptance stage which are likely to be
completed, the volume at mid-September exceeded NOK 30 billion, with a
total of over 100 transactions (over NOK 50 million).
o
o
In recent months, the loan financing situation has improved even more for
low-risk capital-intensive projects, but has become more challenging for
residential developers in particular.
Weaker prospects for growth in the Norwegian economy and lower optimism
among Norwegian companies have been contributory factors in our
downward revision of our demand forecasts. We expect net absorption to
total 530,000 m² during the period 2013-16.
o
o
We have registered three office sales with a net yield of under 5.25% this
year. Based on the assumed low rent/clear rent growth potential in these
properties, as well as the interest growth in recent months, we stand by our
estimate of a prime yield of 5.25% for Oslo. Rising market rent levels
continue to contribute positively to the values in the prime segment.
We have not registered any additional new office development projects
since the spring report. Our new construction summary shows that firm
projects for the period 2013-16 represent approx. 385,000 m² of offices.
Our forecasts are based on 515,000 m2 of new construction in the same
period.
o
We have only registered 8 existing buildings that can offer more than
10,000 m2 over the next twelve months. The combination of increased
construction costs and a lack of large premises will trigger new office
development projects with rent levels averaging from approx.
NOK 2,000/m² per year and upwards.
o
Our forecast for net absorption and net new construction means a marginal
decline in vacancy this year, which will then continue to fall steadily to
below 5% in 2016.
o
Market rent levels have risen by approx. 5% in Oslo during the last year. This
is in line with our expectations and we expect similar annual growth in rent
levels over the next few years. The growth should be seen in the context of
the gradually rising standard of the premises being leased, which means
that some of the profits go to increased adaptation costs.
o
For many office properties in Oslo, increased adaptation costs have largely
eliminated the value effect of generally rising market rent levels. However,
there are several office properties with short-term contracts that have
increased in value (a more detailed description can be found in the last
paragraph on page 22).
o
Annual CPI growth has been surprisingly positive in recent months and the
August level was as high as 3.2%. The level is likely to fall a little, but
provided the growth rate holds up reasonably well for the year, it will have a
positive effect on returns for 2013.
o
The Norwegian Real Estate Fund Index (formerly UNION's funds index) shows
that fund returns fell by 0.6% in Q2, but in net terms they have risen by 3.2%
for the year to date.
4
Lille Grensen 7
Oslo
UNION Norsk Næringsmegling
provided advisory services to
Nordea Liv. The vendor was
OBOS Forretningsbygg AS.
5
MACRO
Norwegian economy – prospects for 2012-2016
Moderate but increasing growth for Norway's
trading partners
Reduced growth rate for Norwegian economy...
o
o
o
o
GDP growth, annual change (%)
The eurozone returned to positive growth in Q2, although the forecasts
indicate low growth for several years. Growth for the USA is likely to be
higher than the trend rate from next year, while the emerging economies
are expected to show annual growth of 4 to 5%.
2013E
2014E
2015/16E*
USA
1.75
3.00
3.25
Emerging economies**
3.25
4.00
4.75
China
7.50
7.50
7.50
Eurozone
Forecasts for the Norwegian economy have been revised downwards and
there is a widening discrepancy in what different sources expect. Four
analysts that published forecasts in Q3 presented GDP (excl. oil and gas)
estimates for next year that varied from 2.0% (DNB Markets) to 4.2%
(Samfunnsøkonomisk Analyse). The average gives growth of 2.0% this year
and 2.8% in 2014.
(0.25)
1.00
1.75
UK
1.25
2.25
2.25
Norway (excl. oil and gas)
1.75
2.25
2.75
Sweden
1.50
2.50
2.75
Norwegian trading partners
1.25
2.50
2.75
Source: Norges Bank, September 2013
*Average annual growth. **Emerging economies (excluding China)
Private and public consumption and oil investments are driving growth.
Annual CPI growth was up at 3.2% in August.
Norway – Key figures (annual percentage change)
…but conditions for commercial property still good
The overall trend for the Norwegian economy shows that we have had a
moderate economic upturn since 2010. In addition, the consensus is that
growth will be low this year, gradually returning to the trend rate over the
course of 2014/2015. Forecasts for relevant overall conditions for commercial
property are not as encouraging as earlier in the year, but are still good. We
are also aware that most commercial property is located in the cities where
growth will continue to be stronger than for the country as a whole. The
combination of Norges Bank's expectation of 1% annual employment growth in
Norway and strong population growth contributes to increased demand for
commercial properties in growth areas. An overwhelming majority of
companies expect improved or unchanged profitability and a clear majority
expect increased staffing. Fewer than 1 in 10 expect reduced staffing.
Annual change (%)
2012
2013E
2014E
2015E
2016E
GDP – excl. oil and gas
3.40
1.75
2.25
2.75
2.75
GDP
3.10
0.25
2.00
2.75
2.25
CPI
0.80
2.25
2.25
2.00
2.00
Private consumption
3.00
2.25
2.50
2.75
2.75
Public consumption
1.80
2.50
2.75
Oil-related investments
14.50
12.50
3.75
1.50
1.75
Non-petroleum exports
2.20
1.75
0.25
Employment
2.10
1.25
1.00
1.00
1.00
Unemployment (level)
3.20
3.50
3.50
3.75
3.75
Source: Norges Bank, September 2013
6
MACRO
The labour market – Norway/Oslo
Downward revision of forecasts - better in Oslo
than Norway
o
Employment in Norway has increased by approx. 90,000 over the last two
years. In Q2, the consensus estimate was further growth of approx. 90,000
for the years 2013-2015. This has now been reduced to approx. 70,000.
o
UNION Gruppen's calculations from Statistics Norway's data show that total
office employment in Oslo, Asker and Bærum rose by 4.4% for 2011 and
2012 combined, a total increase of just over 11,000 employees.
o
Our calculations of the number of office jobs advertised on Finn.no point
to a declining trend since the middle of 2012. The level is now 15% below
the peak of last year, but 32% above the lowest level in 2009.
o
The Manpower survey (in Sept.) shows a majority of 3% of companies in
Norway and 5% in Greater Oslo expecting staffing growth in Q4.
12-month trend for no. of vacant office jobs in Oslo
3 000
2 800
2 600
2 400
2 200
2 000
1 800
1 600
1 400
1 200
Source: UNION/Finn.no
Change in no. employed, Oslo. NAV 2013 estimate +7,000
Percentage change in employment in Norway
2011
2012
2013E
2014E
2015E
15 672
13 270
17 000
1.3
2.1
0.5
0.7
0.5
Norges Bank - September 2013
1.3
2.1
1.3
1.0
1.0
NHO - September 2013
1.3
2.2
1.0
1.0
-
Consensus
1.3
2.1
0.9
0.9
0.8
24 785
24 558
20 649
Change (no. employed)
33 974
56 477
12 000
No. employed
DNB Markets - August 2013
9 828
9 371
7 000
6 259
7 000
2 880
4 559
2 000
(3 000)
(8 000)
-3 950
-11 796
-77
-11 202
-4 658
(13 000)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E
Source: UNION/Statistics Norway/NAV Oslo
7
MACRO
Interest rates
Total cost of debt up by approx. 40 points from Q2
o
o
o
o
Nordea's interest rate forecasts, September 2013
At its meeting in September, Norges Bank left its key policy rate
unchanged at 1.5%. The Central Bank announced a marginally higher
interest rate path than indicated in Q2.
3M
3-month NIBOR
1.74
Key policy rate
Jun 14
Dec 14
Dec 15
1.70
1.95
1.96
2.45
1.50
1.50
1.75
1.75
2.25
Spread
0.24
0.20
0.20
0.21
0.20
10-year swap
3.49
3.34
3.69
3.80
3.89
The 10-year swap rate at 30 September was 3.36%, compared with less
than 3% at its lowest level in May. Similarly, the 5-year swap rate has
increased from 2.25% to 2.74%.
10-year Gov.
3.13
2.84
3.29
3.50
3.59
Spread
0.36
0.50
0.40
0.30
0.30
UNION Bank Survey for Q3 2013 shows that the majority of new loans now
have an equity ratio of 33%, a bank margin of 229 points, but a duration of
only 4.2 years. The typical overall cost of debt for new loans varies from
approx. 4.5% for a 3-year loan to 5.15% for a 5-year loan at current rates.
3-month NIBOR
2.97
2.85
3.17
3.25
3.46
1.75
1.64
1.74
1.84
1.44
The banks' interest rate forecasts indicate a slight increase in rates.
Nordea's September forecast is for 10-year swap rates to rise to 3.80% by
the end of 2014.
Mix of 70% 10-year swap and 30%
10-year swap minus 3-month NIBOR
Interest rate movements since beginning of year
3M NIBOR
5-yr swap rate
Swap and money market rates in selected markets
12M NIBOR. 3, 5, 7 and 10-year swap rates.
4.0
10-yr swap rate
4.0
3.5
3.5
3.0
3.0
%
Spot
Nordea - September 2013
2.5
2.5
2.0
2.0
%1.5
1.0
1.5
0.5
1.0
0
1-yr swap
3-yr swap
NOK
Source: DNB Markets, 19 September 2013
Source: DNB Markets
8
5-yr swap
EUR
7-yr swap
USD
10-yr swap
Strandveien 4-8
Lysaker
handled the lease of 13.500 m²
office space to Lundin Norway AS
on behalf of Aberdeen Asset
Management AS.
9
TRANSACTION MARKET, 2013 YEAR TO DATE
General summary and assessments. See separate pages (12-20) for Oslo/Akershus, Office, Retail,
Logistics, Hotel, Residential, Bergen, Trondheim and Stavanger .
Many transactions, but few billion-sales
Sales volume at mid-September 2013
Since the previous status update in mid-May, we have registered 65
transactions totalling NOK 13.7 billion. The summaries here are related to
completed transactions. If we include the sales processes in the
bid/acceptance stage which are likely to be completed, the volume has passed
NOK 30 billion, totalling more than 100 transactions. In addition, there are a
large number of transactions with a property value below NOK 50 million, and
certain transactions where different developers have brought along new partowners. Last year, ten billion-transactions accounted for just under half of the
sales volume (NOK 27.3 billion). Storebrand's sale of two shopping centre
portfolios (to Sektor Eiendomsutvikling and newly-established Thon Reitan) for
a total of NOK 3.5 billion are the only billion-transactions we have registered so
far this year.
Portfolios/
Confid./Other
Segment
No.
NOK bn.
Office
31
11.4
Hotel
4
0.6
Retail
20
6.1
Logistics
14
3.1
Other
27
3.6
Total
96
24.8
15 %
Mid and
Northern
region
7%
South-West
region
11 %
2013
NOK 24.8 bn.
Oslo/
Akershus
58 %
Other SouthEast region
7%
Source: UNION
Source: UNION
76% of the sales volume for the year to date has been related to offices,
shopping centres and residential transactions, while the volume has been
relatively modest for other retail property, logistics, hotels etc. The category
'Other' includes a large number of sites and properties that will be converted
for new purposes. Most of these are related to some form of residential
development.
Annual transaction volume, NOK billions
NOK bn.
Only deals above NOK 50 million are included
We also registered three education-related sales and the Coliseum cinema at
Majorstuen. With the policies of a new conservative government, we are likely
to see greater private input in sectors such as education, health, culture and
nursery schools. This in turn may trigger more transactions involving this type
of property, and, as is the case in Sweden, property in these sectors will
represent a larger proportion of the commercial market. In the last year, the
life insurance company OPF has bought Søreide school in Bergen, while
syndicates have bought the College in Hamar, and, as already mentioned, the
Colosseum cinema. All three properties had long lease contacts.
80
70
60
50
40
30
20
10
0
68
56
53
44
39
28
15
22
50
36
15
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E
Source: UNION from 2008. DNB Næringsmegling before 2008
10
INVESTOR DISTRIBUTION AND NET YIELDS
The transaction volume in mid-September, by investor categories and yield levels
Syndicates contribute to the good dynamics
Proportion bought/sold and net purchases in NOK bn.
For 2013, we still expect that property companies and syndicates
(including club deals) will be the biggest net buyers, while Norwegian
funds, life insurance companies and property users will be net sellers.
There have been 63 different buyers so far this year, including some
newly established property companies. The transaction involving the
corner building Karl Johans gate 8/Dronningens gate 25 was an example
of Norwegian funds and foreigners investing without this appearing in the
table. The UNION Eiendomsinvest Norge fund and a Canadian player each
bought a minority share of 25.5%, while the private property company
Scandinaviegaarden retained 49%. Nordea Liv, Oslo Pensjonsforsikring
(OPF) and KLP have been net buyers this year. However, several sales
from Storebrand and DNB have resulted in the unusual situation of life
insurance companies being net sellers of commercial real estate during
the last year. So far this year, eight syndicates have completed 18
purchases and five sales. The syndicates have also acted as purchasing
advisors in certain transactions. The syndicates have purchased several
properties from private investors. Many of the syndicates are made up of
a small number of investors, usually with one leading investor that can
exercise a high degree of control. We have registered 14 sales from
property users this year. Sparebanken Vest, Statoil Fuel & Retail and
Nordisk Film are among those that have sold properties with long-term
leases. Over the last year, one in four sales has had a net yield of 6% or
less, while fewer than 10% of sales have had a yield of over 8%. However,
it should be pointed out that we only include transactions over NOK 50
million and that there are probably several sales outside the major cities
that we have not picked up.
Investor categories
Bought
Sold
Property companies
50 %
32 %
4.4
12.4
8.0
Norwegian funds
0%
7%
-1.7
0.0
1.7
Syndicates
19 %
4%
3.7
4.6
0.9
Foreigners, incl. funds
0%
0%
0.1
0.1
0.0
Pension funds/Insurance
11 %
28 %
-4.4
2.7
7.1
Private investors
6%
13 %
-1.8
1.4
3.2
Property users
10 %
14 %
-1.0
2.4
3.5
Other or confidential
5%
2%
0.8
1.2
0.4
100 %
100 %
0.0
24.8
24.8
Total
Net bought Bought
Source: UNION
Transactions last 12 months by yield level
8% or higher
net-yield:
9%
6% or lower
net-yield:
24 %
100
transactions
with yield data
7 to 8%
net-yield:
34 %
11
Source: UNION
6 to 7%
net-yield:
33 %
Sold
TRANSACTION MARKET – Oslo/Akershus
42 different purchasers of 63 properties so far this year
This year's transactions in Oslo/Akershus have, as last year, been marked by
sales of large individual properties within the office segment and a strikingly
large number of residential-related transactions. Residential-related
transactions represent the highest proportion in 'Other' in the pie chart on the
right, but we also find the Colosseum cinema and property with tenants in
education. The current loan financing situation appears more challenging for
residential developers in particular (fewer available banks and higher
requirements regarding capital and advance sales). The combination of the
financing situation, rising construction costs and a certain slowdown in new
home sales may result in a fall-off in residential building and fewer residentialrelated transactions during the coming year. A distinctive feature this year has
been the high sales volume in Nydalen, where we have registered five
transactions totalling approx. NOK 3 billion so far this year. In the retail
property segment, there have not been any large shopping centre sales in
Oslo/Akershus, although some smaller shopping centres have been sold. The
same applies to several single-user properties, such as Landøyveien 2 in Asker,
with Plantasjen as tenant. In Oslo centre, Victoria Eiendom has purchased
Kongens gate 31 and, as mentioned on p. 11, 51% of Karl Johans gate 8 has
been sold.
Segmentation in Oslo/Akershus, year to date
Other
19 %
Logistics/
Industrial
6%
2013
NOK 14.4 bn.
Retail
9%
Office
63 %
Hotel
3%
Source: UNION
Proportion bought/sold, year to date (Sept. 2013)
Investor categories
Bought
Sold
Net bought Bought
Sold
Property companies
51 %
43 %
1.1
7.3
6.2
The syndicates have been the largest net buyer so far this year. Nine of their 14
purchases in Oslo/Akershus this year had a property value below NOK 150
million. In total, we have registered 42 different buyers in Oslo/Akershus in
2013. The City of Oslo is one of five purchasers that have bought property for
their own use and the "Other" category is primarily made up of residential
developers. There have been seven sales in the Logistics/Industrial category,
and at least three of these are scheduled or being assessed for conversion for
other purposes. There have been three hotel sales this year, including
Stortingsgaten 14 and 16, which is the only large sale we are aware of this year
Norwegian funds
0%
11 %
-1.5
0.0
1.5
Syndicates
21 %
5%
2.3
3.0
0.7
0%
0%
0.1
0.1
0.0
8%
21 %
-1.8
1.2
3.0
Private investors
3%
10 %
-1.0
0.4
1.4
Property users
15 %
10 %
0.7
2.1
1.5
2%
1%
0.2
0.3
0.1
that has been triggered by a bank.
Total
100 %
100 %
0.0
14.4
14.4
Source: UNION
12
TRANSACTION MARKET - OFFICE
Many buyers, but different and selective preferences
Office transactions, 2009 to end of September 2013
In the year to date, office sales have accounted for 46% of the transaction
volume measured in value. Eight individual office properties with a value
over NOK 500 million were sold in the first half of the year, but there were
no billion-sales. Five of the eight major sales had ten or more years left on
their lease contracts. Large office sales since the spring report include Ferd
Eiendom's purchase of Strandveien 4-8 (Lundin as tenant), Entra Eiendom's
purchase of Vahls gate 1-3 (Agency for Planning and Building Services as
tenant) and NRP's purchase of Gullhaug Torg 4 (Ministry of Justice as
tenant). We have registered 27 buyers of office property so far this year.
The group can be roughly divided into three categories: those seeking
reliable cash flows from long-term contracts (including syndicates), those
seeking to profit from building alterations/refurbishment (e.g. property
companies) and those purchasing for their own use (e.g. Orkla and
Statnett). At present, office properties totalling over NOK 4 billion are in
the bidding/acceptance stage and it is our assessment that there is
significant interest from both foreign and Norwegian investors.
NOK billions
Number of Transactions
70
63
61
60
25
20
50
50
40
31
29
30
22
11
10
20
14
14
15
6
5
10
0
0
2009
2010
2011
2012
2013
Source: UNION
2009
2010
2011
2012
2013
Source: UNION
Prime yield and 10-year swap rate (at Sept. 2013)
Confidence in the Oslo office rental market appears strong. There has been
an increase in interest in office properties with short leases over the last
year, although the interest is focused on properties in well-established
office locations. However, there are major differences between the banks'
assessments with regard to financing such purchases. In August, we asked
the banks how many years must remain on the lease contract of an office
property in central Oslo for them to be positive to providing a 70% five-year
loan (various assumptions were added). The answers ranged between three
and eight years. We have registered three office sales with a net yield of
under 5.25% this year. Based on the assumed low rent in these properties,
as well as the interest growth in recent months, we stand by our estimate
of a prime yield of 5.25%.
8
7
6
5
%4
3
2
1998
2001
2004
10-year swap rate
Source: UNION/DNB Markets
13
2007
2010
Prime yield
2013
TRANSACTION MARKET - RETAIL
Proportion bought/sold, year to date 2013
Concentration strategy triggers transactions
In the year to date, we have registered 20 transactions totalling NOK 6.1 billion.
Of 18 registered net yields, only two were over 7.4%, while as many as six were
6.25% or lower. In other words, these are properties with low lessor risk. These
include well-located retail properties in central Oslo, single-user properties with
Plantasjen or car dealerships as tenants. Sales of large shopping centres by
Storebrand and Nordea have contributed to life insurance companies being the
largest net seller. Syndicates have bought six retail properties this year, five of
which had a value below NOK 150 million. Momentus's purchase of Lysaker Brygge
21-41 and Victoria Eiendom's purchase of Kongens gate 31 are examples of
property companies investing with development and geographical concentration
in mind within defined local areas. We are seeing other players focusing on large
and medium-sized shopping centres.
Investor categories
Bought
Sold
Property companies
71 %
6%
Net bought Bought
4.0
4.3
Sold
0.4
Norwegian funds
0%
9%
-0.5
0.0
0.5
Syndicates
17 %
4%
0.8
1.0
0.3
0%
4%
-0.2
0.0
0.2
0%
69 %
-4.2
0.0
4.2
Private investors
2%
8%
-0.4
0.1
0.5
Property users
0%
0%
0.0
0.0
0.0
10 %
0%
0.6
0.6
0.0
Total
100 %
100 %
0.0
6.1
6.1
Source: UNION
Virke (Enterprise Federation of Norway) expects
4% growth in retail sales next year
o
o
o
2013: from -2.0% for footwear to 4.0% for sport
2010
2011
2012
2013E
2014E
Groceries
2.2
3.5
3.6
3.5
4.0
Clothing
1.2
0.9
2.5
2.0
3.0
Footwear
3.7
1.9
(0.5)
(2.0)
3.0
Furniture
4.1
4.8
4.5
3.0
4.0
Electronics
3.1
(1.1)
1.9
4.0
4.0
DIY
4.5
4.6
6.8
2.0
5.0
Sports equipment
6.3
(1.4)
2.8
4.0
4.0
Total - Retail
2.7
2.9
3.6
3.0
4.0
Yearly growth in turnover(%)
Chains often manage to generate significantly higher prices for identical
products in Norway compared with other countries. With the combination of
strong population growth and solid macro figures, Norway stands out as an
attractive establishment country for companies. Foreign players contribute to
the increased willingness to pay for the best high street retail locations.
Virke has revised down its 2013 growth forecasts for retail sales from 3.5% in
March to 3.0% in September. The forecast for next year is for general growth in
retail sales of 4%, with the strongest growth for building materials.
In August, shopping centre sales had increased by 4.0% compared with the
same period the previous year, according to Kvarud Analyse. However, after
adjustment for trading days and changes in area, the growth was only 1.5% in
Norway/2.7% in Oslo.
Source: Virke (Enterprise Federation of Norway), September 2013
14
TRANSACTION MARKET – LOGISTICS
Properties in warehousing, combination, terminals and industry
Proportion bought/sold, NOK bn., year to date
Five sale-leaseback transactions so far this year
The transaction volume has shown a declining trend since 2012. We registered
50 sales in 2011, 21 last year and have registered 14 for the year to date.
Three large transactions have accounted for 66% of the transaction volume so
far this year, measured in value, while the remaining 11 transactions have all
had values below NOK 160 million. Three of the sales have been industrial and
combination properties scheduled for full or partial conversion for residential
purposes.
Investor categories
Bought
Sold
Property companies
16 %
16 %
0.0
0.5
0.5
Norwegian funds
0%
2%
-0.1
0.0
0.1
Syndicates
40 %
0%
1.3
1.3
0.0
0%
0%
0.0
0.0
0.0
29 %
0%
0.9
0.9
0.0
Our assessment of the prime yield for logistics is 6.5%. Since 2012, we have
recorded a total of 20 yields, with the average approx. 7.5%. The level
reflects the fact that low-risk properties have primarily been sold in this
segment. The lowest yield recorded this year was 6.85% and four of the sales
had between 19 and 25 years remaining on the leases.
Private investors
0%
32 %
-1.0
0.0
1.0
Property users
5%
44 %
-1.2
0.2
1.4
9%
7%
0.1
0.3
0.2
100 %
100 %
0.0
3.1
3.1
Total
Net bought Bought
Sold
Source: UNION
Declining vacancy in Oslo/Akershus
Number of vacant premises in Oslo/Akershus
The logistics market in Oslo/Akershus has achieved a better balance during
the last year or so. Several contracts in the range of 5 to 10,000 m² have been
signed this year. In the chart on the right, the blue bars show the number of
vacant premises offering 500 m² or more in warehousing/combination in
Oslo/Akershus by quarter. Industrial buildings are not included in the figures.
Measured in the number of vacant premises, vacancies have fallen from over
200 at the end of 2011 to 136 in September. Disregarding potential new
construction, vacancy has declined by just over 100,000 m² to approx.
300,000 m². Rents in the Oslo area are normally in the range NOK 600 to
1,000/m² per year. For prime areas, such as Alnabru, new construction with a
high level of customisation, office sections, refrigerated warehouses etc.
normally has a higher rent per square metre. For the best areas, we expect
slightly rising rents.
250
200
150
100
50
Advertisements
12-month trend
0
Q1
10
Q2
10
Q3
10
15
Q4
10
Q1
11
Q2
11
Q3
11
Q4
11
Q1
12
Q2
12
Q3
12
Q4
12
Q1
13
Q2
13
Q3
13
TRANSACTION MARKET – HOTEL
Property companies and private investors sole
purchasers
Slower growth in RevPAR
At the mid-September point, we had only registered four hotel sales over
NOK 50 million for this year, with three of the properties located in Oslo. In
autumn, Canica (Stein Erik Hagen) acquired Fritzøe Eiendom's shares (50%)
in the Farris Bad spa hotel in Larvik and now owns 100%. We now also
know, by way of Hamar Arbeiderblad/Nenyheter.no, that Petter Stordalen
has purchased the Astoria conference hotel in Hamar for NOK 76 million
through the company Home Capital. Home Capital's acquisition of
Stortingsgaten 14 and 16 before the summer is worthy of note. The
transaction is the only major sale in commercial property we are aware of
this year that has been triggered by a bank. The sale price was NOK 230
million, with an additional contingent consideration of NOK 30 million.
None of the hotels this year have been bought by syndicates, life
insurance/pension companies or funds.
o
Supply of new hotel rooms through new construction and extension has
absorbed the growth in demand, which means that revenue per room
(RevPAR) only increased by just under 1% in the first seven months of the
year in both Norway and Oslo. During this year, growth in room rates has
been lower than CPI growth.
o
Horwath Consulting's sample survey, with responses from 234 hotels, shows
that profitability last year ranged from 1.1% for hotels with fewer than 60
rooms to 5.0% for hotels with more than 100 rooms.
o
The sample survey showed that the hotels used 25.5% of their income on
rent last year compared with 24.6% in 2011. Several landlords probably
had income growth above the consumer price index, but there is a wide
variation. As many as 36% of the hotels surveyed reported a deficit last
year.
Room occupancy January to July, by year
Key figures Norway/Oslo – January to July
January - July
2011
2012
2013
Annual change
Norway
446
450
453
1%
Oslo
610
563
566
1%
Norway
6 527
6 834
7 009
3%
Oslo
1 299
1 276
1 350
6%
Norway
859
867
878
1%
Oslo
896
873
891
2%
RevPar YTD (NOK)
%
Hotel turnover (NOK m)
Price per room (YTD)
80
75
70
65
60
55
50
45
40
1995
1997
1999
Source: Statistics Norway
Source: Statistics Norway
16
2001
2003
Norway
2005
2007
Oslo
2009
2011
2013
TRANSACTION MARKET – RESIDENTIAL
More challenging loan financing for residential
developers
Average rents have passed NOK 12,000 in Oslo
Last year saw record-high sales of commercial properties and sites scheduled
for residential development. Most of the projects were in Oslo/Akershus and
were primarily related to the construction of apartments. There have also
been many residential-related sales this year, although still fewer than last
year. Several of the properties will be developed for multiple purposes, and
some have an option to retain the current use if the residential plans do not
come to fruition. The loan financing situation has become more challenging
for residential developers in recent months. One of the important banks in
this segment no longer provides loans, while others require a higher
proportion of equity and advance sales. The current financing situation,
construction costs that have already risen sharply and a certain slowdown in
new construction sales may all have an adverse effect on interest in
conversion projects and residential construction in general.
Statistics from Boligbygg KF show that apartments/studios that were let in
Oslo in Q2 achieved an average monthly rent of NOK 12,071. The level has
risen by 3.5% over the last year and by as much as 66% since its lowest
point in 2004.
o
The average square metre price for apartments that were sold in Oslo in
September declined by 1.4% compared with August. The level has only
risen by 1.2% this year and by 2.5% compared with September the previous
year.
o
Residential prices for Norway in general have increased by 2.6% since
September 2012.
o
After the summer holidays, DNB Markets and Samfunnsøkonomisk Analyse
published forecasts for resale home prices, with an average of 1.9% growth
next year, a flat trend in 2015 and a decline of 0.7% in 2016.
Residential prices, 2005 to Aug. 2013, NOK 1,000/m²
13 000
50
12 000
45
NOK 1,000
NOK /month
Monthly rents for apartments/studios in Oslo to Q2 13
o
11 000
10 000
9 000
40
35
30
25
8 000
20
Sep-05
7 000
Dec-06
Oslo
Mar-08
Stavanger
Jun-09
Sep-10
Bergen
Source: Norwegian Association of Real Estate Agents (NEF), August 2013
Source: Opinion
17
Dec-11
Trondheim
Mar-13
Norway
TRANSACTION MARKET - BERGEN
Transactions above NOK 50 million in Bergen/Hordaland and the office rental market in Bergen
Transactions above NOK 50 million, year to date
6% of the transaction volume for the year to date
At least eight transactions over NOK 50 million, totalling NOK 1.56 billion, have
been conducted so far this year. Three properties in sites, development and
combination represent 25% of the volume measured in value, while five office
transactions account for 75% of the volume. In addition, several office
properties are now in due diligence or have received bids. Property companies
and private investors have been the predominant purchasers. Since 2010, we
have recorded the yields from 18 office transactions. The yields have varied
from 5.8% to 8.5%, with an average of 6.9%. The levels reflect the fact that
many of the office sales have been in the low-risk segment. Our assessment of
the prime yield for offices in Bergen is 5.75%. Several players based in Oslo
have bought commercial property in Bergen in recent years. These include four
different syndicates, individual property companies, Oslo players with branch
offices in Bergen and the life insurance company OPF.
Stable rent levels expected*
Market rent levels are largely expected to
have a stable development. The maximum
rent is approx. NOK 2,500/m² per year.
o
For Bergen as a whole, a large number of
lease contracts are in the range of NOK
1,400 to 1,600/m² per year.
o
Office vacancy has shown a slightly rising
trend and is now at approx. 7%*.
Office
75 %
Source: UNION
Rents (NOK/m2 per year) - by half-year from 2005
Average rents for modern, central office premises excl.VAT and common costs
DN June 2013: The average price for
modern, central office premises is a fairly
constant NOK 1,475/m² per year.
o
2013
NOK 1.6 bn.
NOK / m2
o
Sites/
Devel./
Combi.
25 %
1 800
1 600
1 400
1 200
1 000
800
600
400
200
0
1988
1991
1994
Source: Dagens Næringsliv
* Source: Kyte
Næringsmegling April 2013
18
1997
2000
2003
2005
2007
2008
2010
2011
2013
(Jun)
TRANSACTION MARKET - TRONDHEIM
Transactions above NOK 50 million in the Trondheim area and the office rental market in Trondheim
Just over 7% of the sales volume for year to date
At least seven transactions, totalling NOK 1.9 billion, have been conducted so
far this year. As described in the spring report, a large logistics portfolio
(approx. 60,000 m²) was sold for NOK 928 million, with OPF purchasing 80%.
In addition, KLP purchased Verftsgata 2 from Prora Eiendom for NOK 565
million. This means that life insurance and pension companies account for 70%
of the purchase volume for the year to date. Both of these sales, as well as
one other sale, are related to properties that, either fully or partly, have 15
or more years left on their lease contracts. Other properties have been
bought by property companies and contractors with a local connection. Our
assessment of the prime yield for offices is 6.1%. Since 2010, we have
recorded 12 office yields, with the average approx. 7.5%. Two were above 9%,
while two were below 6%.
Other
5%
Office
33 %
Logistics/
Industrial
51 %
101 vacant office premises were reported in
September, compared with 112 in May and 88 in
September 2012. Measured in area, vacancy has
declined by 5,000 m² since May to approx.
60,000 m² in September.
Two different rent trends for attractive and
obsolete. We note that most contracts signed are
in the range of NOK 1,200 to 1,700/m² per year.
As in Bergen, the maximum rent level is approx.
NOK 2,500/m² per year.
o
DN Jun. 2013: The average price for central and
modern office premises is stable at NOK
1,700/m² per year.
Average rents for modern, central office premises excl. VAT and common costs
NOK / m2
o
Retail
11 %
Source: UNION
Declining vacancy trend for offices
o
2013
NOK 1.9 bn.
1 800
1 600
1 400
1 200
1 000
800
600
400
200
0
1988 1991 1994
19
1997
2000
2003
2005
2007 2008 2010
2011
2013
(Jun)
TRANSACTION MARKET - STAVANGER
Transactions above NOK 50 million in the Stavanger area and the office rental market in Stavanger/Forus
Just under 3% of the sales volume for year to date
Sales during this year consist of one site, two office properties, one small
shopping centre and a retail portfolio in the Stavanger region. The total
property value for the five transactions is approx. NOK 650 million. The sellers
are two syndicates, one life insurance company, one property user and private
investors. Two syndicates from Oslo have purchased one of the properties,
while others have been bought by players with local roots. Our assessment of
the prime yield for offices in Stavanger remains 6.0%. Since 2010, we have
recorded 14 office yields in Rogaland, which range from 5.6% (long public
contract) to approx. 8.0%. The average yield in the 14 office sales is 6.8%.
Since 2010, we have registered a total of 18 transactions with a value above
NOK 150 million in the Stavanger region. Fifteen of these have been bought by
Oslo purchasers, including seven different syndicates.
Other
20 %
2013
NOK 0.6
65 bn.
Retail
54 %
Source: UNION
Highest rental growth in central Stavanger
DN Jun. 2013: The average rent for modern, central
offices premises is estimated at NOK 1,950/m² per
year, up from NOK 1,900 in November 2012.
o
Rent prices for high-standard offices in the centre
range from NOK 1,800 to 2,650/m² per year*.
o
At Forus, rent prices for high-standard premises are
between NOK 1,600 and 1,900/m² per year*.
o
Office vacancy has been increasing over the last
year and is expected to rise to just over 6%.
Vacancy is low in the centre and higher at Forus
and in the fringe areas.
Average rents for modern, central office premises excl.VAT and common costs
2 100
1 800
1 500
NOK / m2
o
Office
26 %
1 200
900
600
300
0
1988
Source:
EiendomsMegler 1
NæringsEiendom
May 2013
1991
1994
20
1997
2000
2003
2005
2007
2008
2010
2011
2013
(Jun)
Karenslyst Allé 20
Oslo
handled the lease of 3.288 m² to
Marsh & Mercer on behalf of
Sparebank1 Gruppen ASA. 6.500 m²
is still available in the property.
21
RETURN ON INVESTMENT
Fund returns down 0.6% in Q2, but a net rise of 3.2% in the first half of 2013
Increased value for many office-properties in Oslo
OSE Main Index and Real Estate Index
The Oslo Stock Exchange real estate index has risen by 7.2% in the year to date (2
October), while the main index has risen by 13.6% in the same period.
120
OSE 4040 Real Estate
The Norwegian Real Estate Fund Index (formerly UNION's fund index) tracks the
performance (return including dividend) of Norwegian leveraged funds investing in
commercial property in Norway. The funds are weighted in relation to value-adjusted
equity. Unlike the stock exchange indices, the fund index is not based on actual sales
but on estimates of value. The index is based on eight funds with different launch
dates and values totalling approx. NOK 32 billion. Since the spring report, one of the
funds has revised its Q1 figures and the overall index for Q1 has been restated from
98.4 to 99.0. This means that the Q1 growth was 3.9% and not 3.2% as described in the
spring report. The index fell by 0.6% to 98.4 in Q2, which is 1.6% lower than the
starting level in Q4 2005. Storebrand Eiendomsfond, which is managed by UNION
Eiendomskapital, is now 17.8% above its starting level in Q4 2005 after a decline of
1.6% in Q2. UNION Eiendomsinvest Norge rose by 0.4% in Q2 and is now 44.9% above its
starting level in Q4 2010.
Office properties in Oslo have a heavy weighting in many portfolios. Since the
beginning of 2010, prime properties have gradually risen in value due to falling prime
yield levels and rising market rent levels. During the last two years, there has been
more general growth in market rent levels in Oslo. However, valuations show that
increased adaptation costs have largely eliminated the effect of higher market rent
levels for normal office property. As pointed out in the spring report, properties with
short-term contracts, provided they are in good locations and of a high standard
(minimal need for investment at contract expiration), have also gradually increased in
value as rents are typically well below the current market level. It is also our
assessment that office properties with short-term contracts that are suitable for
major refurbishment/building alterations/extension work will now achieve higher
sales prices, following a marked increase in purchasing interest for this type of
development property over the last one to two years. In particular, there is demand
from property companies and they are able to fund such purchases.
22
OSEBX
100
80
60
40
20
0
Source: Oslo Stock Exchange, at 19 September 2013
Norwegian Real Estate Fund Index and UNION funds
200
175
150
125
100
75
50
25
Source: UNION
Norwegian Real Estate Fund Index
Storebrand Eiendomsfond AS
UNION Eiendomsinvest Norge AS
RETURN ON TOTAL CAPITAL
Statistics and forecasts for return on total capital (unleveraged return)
Positive contribution from growth in market rent levels
o
o
o
o
o
The IPD index shows that return on total capital for commercial property
in general was 4.7% in Norway in 2012. By way of comparison, the annual
level has been 6.7% (CAGR) over the last three years and 8.7% over the last
ten years. ROTC since 1999 has been 9.1% (CAGR), of which 2.2% has been
value growth.
20 %
For Office alone, ROTC last year was 5.0%, compared with an annual level
of 7.3% over the last three years and 8.1% over the last ten years. There
has been an upward revision of the values of several office properties in
the best locations in Oslo in response to rising market rent levels.
5%
15 %
10 %
0%
IPD Norwegian Real Estate Index
-5 %
The chart on the bottom right shows economic growth in Norway and our
total return forecast for an imaginary portfolio that is broadly composed in
terms of property segments and geography. We expect an average annual
total return of 8.5% in the next three years.
IPD Norwegian Office
-10 %
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: IPD Nordic
UNION Gruppen's total return forecast
The forecasts were prepared in May and we have not made adjustments
accordingly. The consumer price index shows a surprisingly high growth
rate and the the consensus is that there will be a marginal downward
revision of GDP estimates.
20
15
In simple terms, the forecasts mean that investors obtain a income return
of approx. 6%, CPI growth of 1.9% and the benefits of a strong office rental
market in Oslo. We have assumed increased adaptation costs in order to
achieve the market rent.
R
e
t
u
r
n
Most rental market expect slight growth in market rent levels. Within
retail with sales-based rent, there will be major differences between
properties that are well located for high street trading and shopping
centres that are challenged by sales growth being absorbed by area
expansion.
12.8
10
10.4
17.6
15.2
5
10.8
8.2
7.0 7.6
4.5
5
8.1 8.2 9.3
4
3
7.4
4.7
2
1
0
2000
2002
2004
2006
-5
2008
-4.6
-10
2010
2012
2014E
0
-1
-2
Property return (un-leveraged)
23
6
18.3
Source: IPD Nordic/Norges Bank/UNION
GDP growth (excluding oil & gas)
GDP growth
o
Total return – total property/office
Strømsveien 96
Oslo
handle the lease of 12,200 m² at
Helsfyr on behalf
of Entra Eiendom AS.
24
NET ABSORPTION BY OFFICE CLUSTER
Net absorption from February 2010 to February 2014E*
Nydalen
Outer West
Asker/Bærum
Outer North and East
Inner City North
Skøyen
Lysaker
Inner City
West
City
Centre
Inner
City
East
Bryn/
Helsfyr
Outer South
Fornebu
*Area absorption for 2013 is estimated
based on our assumptions regarding
vacancy development in Q4. We expect
the vacancy in Oslo, Asker and Bærum
to be relatively stable in the next
quarter.
NB. In the presentation,
Lysaker-Fornebu counts
as one area.
Increase app. 150,000 m²
Increase app. 115,000 m²
Increase: 40,000 to 60,000 m²
Increase: 20,000 to 40,000 m²
Increase up to 15.000 m²
Decrease app. 10,000 m 2
Source: UNION
25
OFFICE RENTAL MARKET IN OSLO - LONG TERM
Main tendency: slowly falling office vacancy and rising market rent levels
12.0 %
2 200
GDP Norway (excl. oil and gas)
2 000
10.0 %
1 800
1 600
8. 0 %
Forecast GDP (excl. oil and gas)
Vacancy rate
1 400
6. 0 %
1 200
Forecast vancancy rate
1 000
4. 0 %
800
2. 0 %
600
400
0. 0 %
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
- 2. 0 %
2012
2013
2014
2015
2016
200
Rents in nominal values
Forecast rents, nominal
values
Rental price CPII -adjusted
(2011)
-
The chart summarises our main trend scenario for new construction, net
conversion, demand, office vacancy rates and rents. Our calculations, based on
data from four different analysts, show a consensus estimate that is close to
the trend rate for the Norwegian economy (excl. oil and gas), which is 2.7%,
over the next few years.
to see a gradual race towards completion by 2015 for those who have not
already signed lease contracts. There have been fewer firm new office
development projects than we expected. This has been instrumental in our
downward revision of the new construction forecast for the period 2014-16.
Based on data from Eiendomsverdi Næring, we have calculated the twelvemonth rolling average for rents in Oslo. The average shows 5.2% growth in
average rents, compared with the same quarter the previous year. We expect
similar growth over the next few years. However, growth in rents must be
viewed in the context of higher adaptation costs, which eat up some of the
profits. In other words, the average property that is leased is of increasingly
high quality and in more optimal locations.
Economic barometers, labour force surveys and figures for office positions
support the same scenario, namely that the mood is a little less optimistic than
six months ago, but is nevertheless moderately positive. In view of this, we
have revised down our forecasts for demand since the previous market report.
The combination of residential conversions and a lower rate of new
construction is still helping to keep demand sufficiently high for vacancy to fall
in the period ahead.
We would draw attention to the fact that the market is complex and that we
continue to experience a wide disparity in responses for different properties.
Some property products fall through in the competition for tenants. However,
the outlook is bright for modern offices in the right location.
With active developers and limited availability of large premises, new
construction could be potentially higher than we have assumed. However,
completion of new construction is all in place for 2014, and we are beginning
26
THE OFFICE MARKET – SUPPLY & DEMAND
Oslo, Asker and Bærum
Demand exceeding supply
o
o
o
o
o
1,000 m2
Our forecast for net absorption is 140,000 m2 this year, down from
200,000 m2 in the previous year. We expect total net absorption of
530,000 m² for the period 2013-16. Weaker growth prospects for the
Norwegian economy, lower planned employment and less optimism
among companies have been factors that have prompted us to revise
down the forecast for the second quarter in a row.
Companies' growth expectations have contributed to a higher average
area in new contracts so far this year. Our calculations show that
office employment has risen faster than employment in general.
250
8.0 %
200
7.0 %
6.0 %
150
5.0 %
100
4.0 %
50
3.0 %
-
2.0 %
-50
1.0 %
-100
The graph on the bottom right shows the volume in signed contracts
over the last twelve months. The twelve-month trend for the number
of square metres in registered contracts remains at a high level and is
now approx. 35% above the lowest point in Q4 2009.
0.0 %
2008
2009
2010
2011
Net new built
2012
2013E 2014E 2015E 2016E
Net area absorption
Vacancy (right axis)
Source: UNION
Volume in signed contracts (m²)
For the period 2013-16, we expect total new construction of 515,000
m², with firm projects representing approx. 385,000 m² of the figure.
New construction is distributed across all office areas. We have not
added any projects to the new office development list since the last
report.
850
800
1,000 m2
o
Net new construction, absorption and vacancy
New construction makes many locations more challenging
environments and we expect approx. 40,000 m² a year in net
conversion from offices. This means that the net supply of new
construction will be approx. 350,000 m² in the period 2013-16.
750
700
650
600
550
500
With a net absorption that is higher than the net supply of new
buildings in the period, office vacancy will fall. Our forecast is for
vacancy to fall to below 5% by 2016.
Total m2 signed
27
Source: Eiendomsverdi Næring AS
Linear trend
COMPLETION OF NEW OFFICE BUILDINGS
2013-2016, firm projects only – total approx. 385,000 m2
Nydalen
Outer West
Outer North and East
Asker/Bærum
Inner City North
Økern/Hasle/
Løren
Skøyen
Lysaker
Inner City
West
City
Centre
Bryn/
Helsfyr
Inner
City East
Outer South
Fornebu
Approx.105,000 m²
Approx.55,000 m²
20,000 to 40,000 m²
10,000 to 20,000 m²
5,000 to 10,000 m²
No new buildings
Source: UNION
28
OFFICE RENTAL MARKET - SHORT TERM
Vacancy in Oslo, Asker and Bærum
Vacancy is falling slowly
o
o
o
o
o
o
o
Our most recent figures show a vacancy rate of approx. 6.6%. This is
marginally down from 6.7% in spring. Vacancy peaked at around 7.3%
at the beginning of the year.
8.0 %
7.5 %
7.0 %
Office vacancy rates vary greatly from area to area. Vacancy varies
from approx. 5% in the central areas to just over 10% in the outer
south, north and east fringe areas. We expect the low vacancy in the
central areas to gradually spread to the fringe areas.
6.9 % 7.0 %
7.3 % 7.3 %
6.9 %
6.5 %
6.7 % 6.6 %
6.5 %
6.0 %
5.5 %
Office vacancy in the CBD (central business district) is now 4.3%.
Norwegian Property is constantly signing new contracts at Aker Brygge,
and will probably succeed in filling the premises before the
refurbishment is completed. If this is the case, any increase in office
vacancy will be temporary.
5.0 %
Number of premises in Oslo, Asker and Bærum
There were 721 vacant premises in Oslo, Asker and Bærum in
September. This is 13 fewer premises than in April, but 11 more than
at the same point the previous year. In other words, the number of
vacant premises has been relatively stable over the last year.
800
763
750
We have only registered eight existing buildings that can offer more
than 10,000 m2 over the next twelve months.
741
729
710
700
Despite the relatively low vacancy in central areas, there are still
many small premises to choose from. In office clusters such as
Bryn/Helsfyr, Skøyen and Lysaker/Fornebu, vacancy is concentrated in
a small number of large premises.
650
600
The average area for the advertised properties is approx. 5% lower
than at the same point the previous year.
29
733
734
721
OFFICE RENTAL MARKET – RENT LEVELS
High rent levels in the major contracts
Average rents in Oslo, NOK/m² per year
The top graph shows average rental growth in Oslo. Our calculation of the 12month trend shows that it now costs on average NOK 1,785/m2 per year to
rent offices in Oslo. This is 3.2% up from the previous quarter and 17.1% above
the lowest level in Q1 2010.
2 000
In the graph on the bottom right, we include both average rent and weighted
average rent. The average for the total contracts does not take into account
the different sizes of premises leased under the different contracts. However,
the weighted average rent takes into account the fact that different leases
have different square metre totals. If the square metre price is higher in large
contracts than in small ones, the weighted average rent will be higher than
the average rent. The graph shows that this is the case throughout the period.
Large areas normally qualify for a volume discount, but large tenants typically
demand a higher standard, better location and cause higher adaptation costs
for the property owners.
1 400
1 800
1 600
1 200
1 000
800
Average rent vs. weighted average rent, NOK/ m2 per year
Which of the two averages best describes rental growth depends on the object
of illustration. For the average tenant (typically a small or medium-sized
enterprise), average rental growth provides a good illustration of the market.
For funds, property companies and other large players with significant
property portfolios, weighted average rental growth provides a better
illustration of rental income development. Contracts with large areas are
normally more important to cash flows than those with small areas.
Consequently, rental income development over time will correspond better
with weighted average rent. Weighted average rent has increased by 17%
since 2010. The difference between average rent and weighted average rent
is now NOK 270/m2 per year, which corresponds to approx. 15%. The high
level of new construction has probably contributed to the difference
increasing since 2008.
2 200
500
2 000
400
1 800
300
1 600
200
1 400
100
1 200
1 000
-
2000
2002
2004
Difference (right axis)
30
2006
2008
Average rent
2010
2012
Weighted average rent
ANALYSIS OF RENT LEVELS
UNION Gruppen's autumn 2013 rent analysis, with vacancy rates at September 2013
Existing
premises
Rent levels for new contracts above 500 m² in
NOK/m² per year excl. VAT, common costs
and parking
CBD - Vika, Aker Brygge & Tjuvholmen
City Centre incl. Bjørvika
Inner City West incl. Majorstua
Inner City North incl. Ullevaal stadion
Inner City East incl. Kværnerbyen
Skøyen
Lysaker
Fornebu
Nydalen
Bryn / Helsfyr
Outer West incl. Ullern and Smestad
Økern - Hasle – Løren - Ulven
Outer North and East incl. Furuset
Outer South incl. Ryen
Asker/Bærum excl. Lysaker/Fbu.
New premises
High
Normal
top standard top standard standard - standard - Number of
Vacancy
Change in
and best
and best
typical rent typical rent advertised September vacancy last
location
location
level
level
premises
2013
12 months
4 300
3 400
2 400
1 950
1 900
3 000
2 350
2 000
2 200
2 000
1 900
2 050
1 700
1 700
2 000
4 100
3 100
2 250
1 800
1 750
2 850
2 250
1 800
2 000
1 850
1 750
1 750
1 600
1 600
1 850
3 300
2 500
1 950
1 600
1 500
2 500
1 900
1 600
1 750
1 700
1 550
1 450
1 350
1 350
1 500
2 550
1 750
1 500
1 250
1 150
1 850
1 550
1 350
1 500
1 300
1 350
1 200
1 150
1 200
1 250
56
147
68
50
13
40
43*
4.3 %
5.7 %
4.8 %
3.9 %
7.4 %
8.9 %
7.2 %*
-0.5 %
1.5 %
1.4 %
-4.5 %
-6.1 %
1.7 %
-1.6 %
21
46
18
6.2 %
6.5 %
3.7 %
0.4 %
0.1 %
-1,9 %
104**
26
89
10.8%**
11.5 %
5.4 %
-0.7 %
4.7 %
-1.5 %
*The figures are for the combined Lysaker-Fornebu area ** Figures for Outer North including Økern – Hasle – Løren - Ulven.
Green indicates a rising tendency, black a flat trend and red a falling tendency.
We have tried to estimate rent levels as accurately as possible. However, factors such as storey in the building, view etc. will naturally affect rent levels. There will also be
differences within each area. For example, the level for new buildings in the centre could vary from NOK 3,400 at its highest in Bjørvika to approx. NOK 2,000 in the least
expensive parts of the centre. In the rent analysis table, we have indicated for the various areas the locations we consider to be top level with "incl. (location)". In City Centre,
for example, we identify Bjørvika as the top location.
31
THE OFFICE RENTAL MARKET BY AREA
Vika/Aker Brygge & Tjuvholmen (CBD)
City Centre
Top rents still rising - but more slowly
Moderate increase in vacancy in the centre
Vacancy is stable at approx. 4.3%, which is the same level as in spring.
Norwegian Property has signed several contracts at Aker Brygge. Wiersholm has
leased approx. 11,000 m2 at Stranden 1, vacating approx. 8,000 m2 of office
space at Ruseløkkveien 26. As more of NPRO's space at Aker Brygge becomes
available for occupancy within twelve months, we expect a temporary increase
in vacancy. However, we believe that there is a good chance that NPRO will fill
the remaining spaces at Aker Brygge before the refurbishment is completed,
which means the increase in vacancy will be temporary.
Although office vacancy in City Centre has risen from 4.2% to 5.7% over the last
year, there has been positive net absorption. Our forecast is for positive net
absorption of approx. 60,000 m2 in 2013. Tenants who move to the new
buildings in the centre, often move from other areas. In addition, we find that
premises vacated in the centre are often leased again relatively quickly. For
example, KLP has leased approx. 9,000 m2 at Prinsens gate 7-9 to Campus
Kristiania, which is expanding its business which is already established in the
neighbouring property. NSB is also vacating this property to move to a new
building in Schweigaardsgate 23. Schibsted has been an active tenant in the last
six months and has extended the lease contract on 6,650 m2 at Apotekergata 10
for five years, in addition to signing approx. 4,000 m 2 in Posthuset in spring.
Amedia has signed a lease contract for 6,500 m2 at Akersgata 34 and 36, while
the Ministry of Education has signed a contract for 9,000 m 2 at Kirkegata 15.
We have found that some contracts have been signed at levels above NOK
4.000/m2 per year in the CBD. These include a recently signed 10-year lease
contract at Bolette Brygge with a rent level of NOK 4,100/m 2 per year. The top
rent in the CDB is approx. 37% above the lowest level in Q4 2009, and we expect
slightly weaker growth in the top rent from now on as the difference between
the alternatives is beginning to widen.
UNION's Rent analysis
Market share of net absorption
7%
Market share of vacant premises
8%
New Premises - top location
3 400
Top standard/location
3 100
High standard - typical rent
2 500
Number of buildings
Normal standard - typical rent
1 750
Total m²
4 300
4 100
3 300
Number of buildings
2 550
Total m²
Vacancy as at September
Vacancy rate
Number of vacant premises
New office development (firm) 2013-2016
1
5 000
2012
2013
Change
4.8 %
4.3 %
-0.5 %
Vacancy rate
56
2
54
32
20 %
20 %
2012
2013
Change
4.2 %
5.7 %
1.5 %
147
21
126
6
105 000
Low vacancy in the belt around the centre
Oslo West
8%
9%
2 400
2 250
1 950
Number of buildings
-
1 500
Total m²
-
Vacancy rate
2012
2013
Change
3.4 %
4.8 %
1.4 %
68
18
50
The belt around City Centre, which consists of Inner City West, Inner City
North and Inner City East, has a combined office vacancy of just 5% in 131
premises. Oslo West has not had a supply of new buildings for the last
four years and has shown slightly negative net absorption since winter
2010. Vacancy remains below 5%. At Sørkedalsveien 8, Stor-Oslo Eiendom
is planning a total refurbishment of the former Statoil building. The plans
also involve an extension of two floors. The property will probably have a
total area of 26,500 m2 and is scheduled for completion in 2017.
In Inner North, KLP has expanded/extended, with Oslo University College
in Stensberggaten 26-28, a total area of approx. 10,000 m2. In Inner
East, vacancy has increased slightly since spring, mainly due to Skatt Øst
moving to Fredrik Selmers vei 4 and vacating approx. 7,500 m 2 at
Hagegaten 22-23.
Inner City North
Inner City East
6%
7%
1 900
1 750
1 500
Number of buildings
1 150
Total m²
1 950
1 800
1 600
Number of buildings
1 250
Total m²
Vacancy rate
1
5 700
2012
2013
Change
8.4 %
3.9 %
-4.5 %
Vacancy rate
50
-10
60
33
2012
4%
2%
2013
13.5 % 7.4 %
23
13
Change
-6.1 %
-10
1
12 500
Skøyen
Lysaker & Fornebu
Vacancy rising at Skøyen
Oil-driven demand
The high level of new construction in Lysaker and Fornebu has contributed to
positive net absorption of approx. 115,000 m² over the last four years. The
market share is now 11%. For the current four-year period, a minimum of
96,000 m² of new offices will be completed and it is therefore very likely that
the market share will rise even more.
Office vacancy is now at 8.9%, which is approx. 1.6 percentage point higher
than in spring. In connection with the co-location of several of its operations,
Orkla is planning a new building of approx. 16,000 m² at Drammensveien 149.
Until its occupancy of Drammensveien in 2016, Orkla will lease 18,000 m2 in the
former Evry premises (Nedre Skøyen vei 26). This means that Orkla will vacate
its present headquarters at Karenslyst Allé 6, which will increase the vacancy
by approx. 8,000 m2. In addition, the vacant Hoffsveien 1C will increase the
vacancy by approx. 9,000 m2.
Increased staffing by companies connected with the oil and gas sector has
contributed to oil-driven demand. Statoil and others have decided to co-locate
their operations at Fornebu and Lysaker. Good access to qualified staff in the
surrounding area has been a contributing factor. Since the last report, UNION
has assisted with the leasing of approx. 13,500 m2 at Strandveien 4-8 to 
With regard to the new contracts, UNION has assisted with the leasing of
approx. 3,288 m2 to Marsh Mercer at Karenslyst Allé 20, while Creuna has
signed a contract for approx. 2,500 m2 at Drammensveien 130. Skøyen has
shown solid rental growth over the last few years. We expect more moderate
growth in future, as the difference against competitors such as Lysaker and
Inner West is beginning to widen.
2 350
2 000
2 250
1 800
1 900
1 600
6%
1 550
1 350
2 850
2 500
Number of buildings
1 850
Total m²
6%
3 000
Vacancy rate
2
25 000
11 %
Number of buildings
6%
Total m²
2012
2013
Change
7.2 %
8.9 %
1.7 %
Vacancy rate
40
-1
41
Rent analysis - Fornebu
Rent analysis - Lysaker
34
2012
2013
Change
8.8 %
7.2 %
-1.6 %
43
-6
49
6
96 000
Asker/Bærum
 Lundin. It is already known that Technip has leased 13,500 m2 of the new
Slightly declining vacancy in Asker/Bærum
building Lysaker Polaris (with an option for a further 5,000 m2).
Our figures show that vacancy in Asker/Bærum (excl. Lyaker and Fornebu) has
fallen by approx. 1.5 percentage point since September last year. Properties
with an attractive location benefit from a generally good rental market. We
expect Asker centre and Sandvika to further reinforce their position as hubs
over the next few years, in line with tenants' preferences for proximity to
public transport. We also find that the area is benefiting from good access to
qualified staff, particularly in relation to oil-related operations and ICT.
Lysaker appears to be competitive on price and we believe that slightly rising
market rent levels are on the cards.
Outer West
Low vacancy
We have not registered any firm new office development projects other than
Oxer Gruppen's completion of Asker Panorama, with a total area of approx.
18,000 m². Kongsberg Gruppen is moving into the property towards the end of
the year.
There has been positive net absorption of approx. 13,000 m² in Outer West
over the last four years. With little new construction activity and moderate
office building stock, the vacancy rate has fallen below 4%. The majority of
the vacancy rate is related to the new building at Silurveien 2, which will be
completed in the first half of 2014. New lease contracts we have registered
include Texas Instruments moving in to 2,500 m2 of office space at Hoffsveien
70C.
4%
2%
2 000
1 850
1 500
Number of buildings
1 250
Total m²
1 900
1 750
1 550
Number of buildings
1 350
Total m²
Vacancy rate
Market rent levels in Asker/Bærum have remained relatively stable over the
last year. We believe that this will largely continue, but we expect slight
growth in the best locations.
1
17 700
2012
2013
Change
5.6 %
3.7 %
-1.9 %
Vacancy rate
18
0
18
35
13 %
12 %
2012
2013
Change
6.9 %
5.4 %
-1.5 %
89
8
81
1
18 000
Nydalen
Bryn/Helsfyr
Solid absorption in Nydalen
Slightly increasing rental growth in the last year
After a period of declining office vacancy in Nydalen, the level is now
slightly up from spring and is marginally higher than at the same point the
previous year. The vacating of approx. 6,300 m2 at Rolf Wickstrømsvei 15
is the main contributor to the increase in vacancy.
Office vacancy at Bryn/Helsfyr and the number of vacant premises have risen
slightly since spring. There are now 46 vacant premises being advertised.
However, over half of the vacant space is related to the three properties Ole
Deviks vei 6, Fredrik Selmers vei 4 and Grenseveien 90.
Our calculations show that Nydalen has shown net absorption of approx.
60,000 m² over the last four years. The Justice Department's move to
Gullhaug Torg after 22 July and three major new office development
projects have all contributed to the significant increase in net absorption.
Since the previous market report, it has become known that
Undervisningsbygg is moving into Oslo Areal's refurbishment project in
Grensesvingen 7, approx. 5,300 m2. We already know that the Climate and
Pollution Agency is moving in to 12,000 m² in the same building, which will
then be filled.
A generally good rental market and a limited selection of premises will
help market rent levels to rise slightly over the next year. However, there
is keen competition for tenants, and the new construction areas of Økern,
Hasle, Løren and Ulven are intensifying this competition.
4%
3%
2 000
1 850
1 700
Number of buildings
1 300
Total m²
2 200
2 000
1 750
Number of buildings
1 500
Total m²
Vacancy rate
Apparent growth in market rent levels must be viewed in the context of many
of the lease contracts being for buildings where the landlord has to make
significant investments. Increased competition from the nearby new
construction areas of Økern, Hasle, Løren and Ulven will also subdue growth
in market rent levels.
1
22 000
2012
2013
Change
5.8 %
6.2 %
0.4 %
Vacancy rate
21
-2
23
36
6%
6%
2012
2013
Change
6.4 %
6.5 %
0.1 %
46
7
39
1
14 000
Outer North/East including Økern, Hasle, Løren
and Ulven
a separate area, as there is particularly high potential for new construction in
these areas. Up to 1 million square meters of commercial development is being
planned in a 20-year perspective. Continuing population growth in Greater Oslo
and good speed in the Norwegian economy are a prerequisite for the
development to proceed. So far, we have only registered three firm new office
development projects, with a total office space of approx. 42,000 m².
Slightly declining vacancy
Outer North and East, which encompass a large geographic area, have had
high vacancy rates in recent years. However, our most recent figures show a
reduction in vacancy. Vacancy is currently approx. 10.8% spread over 104
premises. There are 19 fewer vacant premises than a year ago and our
calculations show positive net absorption for the first time in a long time,
which means that the trend is finally moving in the right direction. However,
we would point out that the area has many long-term vacant properties which
remain difficult to lease.
We expect slight rental growth where contracts are signed, but office vacancy
will remain high.
Outer South
Flat rental growth
In the rent analysis table, we have separated Økern – Hasle – Løren – Ulven as a
Our databases indicate flat rental growth in this area over the last year. We
expect the positive development in the general market to also affect Outer
South, with a main tendency of slight growth for market rent levels. This year,
11,500 m² of offices are being completed in Ryensvingen 5-7 and a further
10,000 m² in Sandstuveien 70.
Rent analysis - Outer North/East
Rent analysis - Økern, Hasle, Løren
1 700
2 050
1 600
1 750
1 350
1 450
1 150
1 200
1 700
1 600
1 350
Number of buildings
1 200
Total m²
9%
Number of buildings
14 %
Total m²
Vacancy rate
2012
2013
11.5 % 10.8 %
123
104
3
42 300
Change
-0.7 %
Vacancy rate
-19
37
2%
4%
2012
2013
Change
6.8 %
11.5 %
4.7 %
26
3
23
2
21 000
A COMPLETE PROPERTY SERVICE
UNION Gruppen is a leading independent operator in the Norwegian commercial property market. Our services include
commercial property brokerage, consultation, market analyses and valuations, corporate finance and asset
management. Our turnover for purchases and sales since 2002 is NOK 62 billion, and in the last four years we have
acted as leasing advisor in transactions totalling 500,000 m². On behalf of investors, we manage commercial property
estimated at a total value of NOK 8.8 billion, focusing on active management and value-creating activities.
We create value from property
UNION Gruppen
CEO Øystein A. Landvik
100% owned by five partners – 49 employees in total
UNION NORSK
NÆRINGSMEGLING
UNION EIENDOMSKAPITAL
Terje Nesbakken/
Hroar Nilsen
Trond Aslaksen
Transactions
Leasing
UNION CORPORATE
Investment
managemen
t
Property
manageme
nt
38
Equity Sales
UNION Gruppen - Bolette Brygge 1 - PO BOX 1715 Vika - 0121 Oslo, Norway
Tel: +47 23 11 69 00 - Fax: +47 23 11 69 70 - www.union.no - [email protected]

Read more - UNION Gruppen

Transcription

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