Retail

Consumers have started to return to their pre-pandemic consumption patterns, and since the start of the year household consumption has been trending downwards, while spending on services has been trending upwards. Increasing optimism and activity in the rental market for retail property were predicted, but exceptionally high inflation and increased interest rates continue to create uncertainty. Investor appetite for retail property has been good so far in 2022.

The pandemic led to material changes in consumption patterns, and household consumption soared as the service sector shut down. When society began to reopen Norwegians once again chose to spend more money on services and less on goods, which is entirely in line with the long-term trend seen before the pandemic. Online retailers, which reached new heights during the pandemic, have also felt the decline in household consumption but still performed better than overall retail sales.

Generelt

General

↑  Prime yield shopping centres

↑  Prime yield high-street

Transaction market

We are seeing a healthy appetite for retail property, with around NOK 10.3 billion of sales by October 2022 – which accounts for 16 per cent of all property transactions in the year to date. Because of the sharp hike in interest rates, we have adjusted our prime yield estimates up to 3.75 percent for high-street retail and 4.75 percent for shopping centre and big-box.

↑  Prime yield big-box

Growth in e-commerce vs total retail sales, percent year/year

Rental market

Following a period of very low activity in the rental market because of the pandemic, things began to pick up somewhat before the summer in the form of several enquiries from tenants looking for premises. Despite growing interest, we have yet to see similar levels of activity when it comes to signed contracts.

Consumer confidence, points

Den høye aktivitetsveksten vi har hatt i norsk økonomi inntil nylig har bidratt til et brennhett kontormarked med svært lav arealledighet og uvanlig høy leieprisvekst. Selv om etterspørselen etter kontorareal skulle kjøle seg ned framover, antar vi at arealledigheten vil bli holdt nede av historisk lav tilførsel av nytt areal. Sammen med høy vekst i KPI, venter vi at lav arealledighet vil bidra til å støtte oppunder veksten i kontorleie til neste år.

Transaction volume, share of total volume

Transaction volume YTD 2022, billion NOK

Outlook

High inflation and rapid interest rises sent consumer confidence to an historical low in September and will probably curb overall consumption in the next year or two. Following a short-term correction, we expect online retail figures to grow far more quickly than overall retail in the coming years. Macroeconomic unrest is causing uncertainty in the rental market and could prompt some tenants to put their processes on hold.