Retail Market Update 2019 H1

Highlights

• Growth in retail sales reached a peak in the summer of 2018, and has been weaker over the last six months
• Consumer confidence (CCI) has fallen somewhat and is just below the long-term average
• E-commerce channels continue to gain market share
• The F&B retail segment with the strongest improvement the last couple of years, but risks over-establishment
• Low high-street leasing activity in 2018
• Continued high activity in the investment market; total 2018 volume of almost NOK 19 billion, which is 22% of the total investment volume

The long-term trend in retail sales is mixed; volume has increased solidly since its turning point in May 2016, and the growth peaked around the summer of 2018, but has shown a relatively flat development during the fall. Consumer confidence experienced a solid increase at the beginning of 2019 after a weak development at the end of 2018, but fell back again in February, and reached the lowest reading since 2016. The fall puts downward pressure on consumption and growth.

According to the latest retail report from Virke, physical retail is still the main channel for the Norwegian consumer. However, in recent years the consumer has changed, and e-commerce channels continue to gain market shares. Physical retail experienced an increase in turnover of only 2% from 2016 to 2017, which is the lowest growth in several years. Foreign e-commerce was the channel with the highest growth, followed by Norwegian e-commerce. Although e-commerce has experienced solid growth in recent years, several players have been struggling with large deficits.

The Oslo high-street retail leasing market experienced some activity at the start of 2018, and new record rents were achieved. These records turned out to be exceptions, rather than a mirror of the market as a whole. The activity slowed after the summer to the lowest in a decade. The players that are active in today’s market are only a few, mainly Nordic brands and non-fashion, as they see an opportunity to bargain. Due to the low activity in the leasing market, conclusive evidence for movements in retail rents are lacking.

Still high activity in the retail transaction market, with close to 40 retail property transactions and approximately NOK 19 billion so far in 2018; about 22% of the total transaction market year to date. Shopping centres accounted for nearly 45% of the retail volume (the Scala/Salto 7bn merger is the reason) while high-street retail and big-box accounted for ~32% and ~24%, respectively.