Rent levels in central Oslo continues to increase - fueled by low vacancy and a strong norwegian economy
- Accelerating rental growth observed in the CBD
- Our prime rent estimate has been adjusted upwards to NOK 4600 per sq. m. Moreover, significantly higher rent levels have been recorded in select high-end properties
- Rents also rise in Nydalen, unlike most other fringe office clusters
- Higher downward pressure on prices in the eastern fringe due to strong competition among many new projects
Office rents in central areas of Oslo have been increasing, and CBD is still characterized by strong landlord advantage. Increasing demand and limited supply have continued to exert upward pressure on prices, with rents for general high standard objects growing at a faster pace than prime rents.
In Vika / Aker Brygge, prime rents have increased by 7% year-on-year nominally, to an estimated NOK 4,600 per sq.m p.a. VIA – Ruseløkkveien 26, which will be completed in 2021, has recorded rent levels up to NOK 6,000 per sq.m.
Rents for general high standard objects in CBD have increased by about 10% year-on-year nominally, driving some tenants, mainly government and municipal agencies, to seek fringe office areas, which are relatively cheap in comparison. However, the strong pipeline of new projects keeps rent levels unchanged in these areas.
- Our estimate of 5-15% nominal rental growth in CBD for 2019 is maintained.
- For the development areas in the eastern fringe, we lower our estimate for 2019 from a 5-10% increase, to no significant change.
This forecast is based on the vacancy and economic growth predictions, as well as the imbalance of supply and demand in CBD and the many developments in the eastern fringe in the coming years.
FLEXIBLE WORKSPACE GROWTH
In our previous reports we have mentioned the rise of flexible offices in Oslo, following the international trends. Take-up of office space for such purpose continues with strong momentum. For 2018, approximately 30% of new leases in Oslo CBD and 13% in the larger Oslo market were signed for co-working entities. Other cities also see some of this trend happening. We expect the high demand from players in this segment to remain strong also going forward, partly as a consequence as WeWork entering the Oslo market.