The general mood in the commercial property markets in the secondary cities of Bergen, Trondheim and Stavanger is one of careful optimism. The office leasing market in Bergen stands out as the best, while Trondheim and Stavanger have fared worse due to oversupply and weak demand, respectively, for the last few years. Nevertheless, all CBD areas report low vacancy and solid tenant demand. The transaction markets reflect the general mood in the country for commercial property, with solid levels and volumes.
Stavanger – Early signs of improved rental market
According to the last market sentiment survey (“Konjunkturbarometeret”) by Sparebank1 SR-Bank, there is a positive sentiment in Rogaland. Businesses are expecting healthy growth – with little effect from the global unrest. The Oil and gas, and industrial sectors are leading the way, with strong growth in Rogaland. The unemployment rate in Stavanger has fallen substantially since peaking in early 2017, and is now just over 2.5 %.
Office vacancy is currently at 10.9 %, up from 9.7 % at the beginning of the year. Forus still has the highest vacancy in the region with a vacancy of 14.4 %. Older office buildings lose competition for tenants in favor of newer buildings. The vacancy in the CBD is currently at 10.8 %. Central properties with good qualities are being let on decent rent levels, while less centrally located, subpar properties are still struggling to attract tenants.
Rent levels in the region has been stable over the last couple of years. Improved prospects in the oil and gas industry and increased investment levels might increase the demand for office space and put some upward pressure on rents. On the other hand, the vacancy rate in the region is still quite high which might hinder rental growth in some submarkets. Still, we are seeing some early signs of upward pressure on rents in Stavanger CBD and at Hinna.
The transaction volume in 2018 was the highest ever recorded. The activity in the market so far in 2019 is at more normal levels historically. The best yields in the region is 4.75 – 5 %.
Rent levels for the main regional cities (click the image to visit our data section):
Bergen – Business as usual
In Bergen, 2019 has so far been a year without the large market fluctuations or exceptional transaction volume. However, there is a healthy demand for properties and prime yield is still at around 4.5 %. As is common in this market, the majority of buyers and sellers are local players.
In the leasing market, there is high demand for centrally located premises, while the supply of such space is diminishing, which puts pressure on rent levels in this segment. Prime rent is currently at NOK 2,900 per sq m, which is an increase of NOK 50 per sq m for the second consecutive half-year. The vacancy rate is still moving downwards as it has since early 2018, and is currently at 7.8 %, down 70 bps.
Trondheim – still rising vacancy
Trondheim office vacancy is up 30 bps since our last report and is currently at 10.9 %, and vacancy has increased by 140 bps since early 2018. This is happening mainly due to the construction of 60,000 m2 of new space during 2019, which equals to 4-5% growth in total stock.
Rent levels are, however, unchanged during the year with prime rent still at NOK 2,200 per sq m, while prime rents in fringe areas varies between NOK 1,700 – 1,900 per sq m. There is a positive development in the most centrally located area from the University to the harbor, including the traditional city centre, where vacancy is low and the expected new volume also low. The focus on technology and innovation plus the city’s policy of favoring bus transport over cars, are the two major forces contributing to this.
The transaction market is unchanged since 2018, with prime office yields close to 4.25% and fringe locations around 5%. Office properties see solid interest locally and nationally, while a major shopping centre, City Syd, has not been sold despite high expectations early this year.
Office vacancy in the main regional cities (click the image to visit our data section):
Additional sources: NAV, Sparebank 1 SR-Bank, Kyte Næringsmegling, EiendomsMegler 1 Midt-Norge AS