Retail

There was strong appetite for retail property in 2022, and the segment accounted for nearly 17 per cent of total transaction volume – its highest share since 2018. After two years of the pandemic and an increase in the consumption of goods over services, the Norwegian consumer is once again spending more on services. Strong price growth and increased interest rates are creating uncertainty for both consumers and investors, however.

Norwegians are once again prioritising services over goods. This is in line with the long-term trend seen before the pandemic. Norwegian shopping centres saw healthy turnover in 2022, and the 60 largest centres announced turnover growth of 6.8 per cent compared with 2021. Higher interest rates and price growth are putting a strain on household finances, and many people are seeing their purchasing power dwindle, something which can impact overall consumption going forward.

General

↑  Prime yield shopping centres

→  Prime yield high-street

Transaction market

The uncertainty has led to a lukewarm start for the transaction market in 2023. Retail property is no exception. We have recorded retail transactions of NOK 870 million as at 25.04.23, making up 8 per cent of the total transaction volume. As of mid-April the prime yield for high-street retail is 4 percent, up from 3.75 percent, and 5 percent for shopping centres and big-box retail, up from 4.75 percent. Further upward pressure on yields are likely in the short term.

→  Prime yield big-box

Retail rents

Rental market

Rental activity rose during 2022, especially in central locations. Luxury goods and automotive businesses generating new demand for premises in the Promenaden district. Increased demand for prime retail space and limited supply of available space have resulted in an upward pressure on prime rent. We have therefore adjusted our view on market rent for prime high-street retail to NOK 30,000 per sqm. However, the high demand for retail space is unique for the Promenaden district. We continue to experience that some processes are halted or delayed due to economic uncertainty.

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 2022, share of total volume

Transaction volume YTD 2022, billion NOK

Outlook

In the short term we expect high inflation and swift interest rate rises to weaken overall consumption, including online shopping. The online shopping trend remains strong, however, and we predict that growth will return to good health as last seen in 2020.