Office

The low activity in the Norwegian transaction market has significantly impacted the volume of traded office properties. The counterbalance to the transaction market has been a strong office leasing market with high demand, especially for centrally located prime properties.

Transaction market

Office buildings continue to be the most traded segment in the Norwegian transaction market, although their share of the total volume has decreased compared to historical averages. Globally, the reduced interest in offices is attributed to increased remote work and uncertainty surrounding the role of offices going forward.

The interest rate developments throughout 2023 led us to increase our prime yield estimate to 4.75 percent in the last quarter of the year. However, the recent decline in interest rates is significant enough, according to our assessment, to keep our yield estimates unchanged for now.

Rent levels for high quality office space in Oslo, NOK per sq m

↑  Prime rent CBD, per sq m

→  Prime yield office

Leasing market

There has been strong activity in the office leasing market throughout 2023. Limited supply of new office space, coupled with high demand, has kept office vacancy rates low throughout the year. As of the beginning of 2024, we measure office vacancy in Oslo at 6 percent, slightly up from 5.5 percent at the beginning of 2023.

→  Office vacancy Oslo

We particularly experience strong demand for the most central offices, and over the past year, Oslo CBD has seen a rental growth of around 10 percent, while the fringe areas have experienced rental growth of just below 5 percent. As of the beginning of 2024, the market rent for office space in Vika-Aker Brygge with "high standard" is NOK 6,300 per square meter, up from NOK 5,700 per square meter at the beginning of 2023.

Remote work is here to stay, but mobility data shows that the activity at offices in Oslo is higher than in the USA and Europe. While office demand has declined globally in recent years, we have seen increased demand for office space in Oslo. Demand for office space is likely to weaken in the short term, but we believe this is due to macroeconomic conditions rather than increased use of remote work.

Vacancy rate Oslo average vs. Oslo CBD

Outlook

Going forward, we expect office vacancy rates to increase, but in our base scenario, it's only a moderate increase. Rental prices have likely peaked after a period of strong growth. Looking ahead, we anticipate rental prices to stabilise at high levels, supported by a weak supply side.

Read our latest analysis on the office market.