Retail

The activity in the transaction market slowed in 2023, and the volume of retail transactions is down nearly 65 percent compared to 2022. There is low activity in the broad retail leasing market, but prime spaces in central Oslo still experience high demand. In the short term, we anticipate that strong price growth and high interest rates will continue to create uncertainty for consumers and investors.

Norwegians have once again started prioritising services over goods, aligning with the long-term trend observed before the pandemic. Norwegian shopping centres continue to surprise on the upside, with the 60 largest shopping centres experiencing a turnover growth of 4.5 percent in 2023 compared to 2022, according to Kvarud Analysis. Increased interest rates and price growth are putting pressure on household finances, and many are experiencing weakened purchasing power, which is likely to impact overall consumption going forward.

General

→  Prime yield shopping centre

→  Prime yield high-street

Transaction market

The low activity in the Norwegian transaction market has also resulted in a significantly lower volume of retail transactions compared to previous years. We have recorded retail transactions amounting to NOK 6.2 billion in 2023, representing a decrease of 63 percent compared to the volume in 2022. Throughout last year, there was continued upward pressure on yields, but at the beginning of 2024, we have chosen to keep our prime yield estimates stable at 4.75 percent for high-street, 5.75 percent for shopping centres, and 6 percent for big box.

→  Prime yield big-box

Rent levels for high quality retail space, NOK per sq m

Leasing market

Retail leasing activity is at low levels, with very few lease contracts being signed in today's market. Retailers seem to be concerned about the future and are deferring significant decisions. However, there are exceptions. In the luxury area, Promenaden Fashion District, several contracts have been signed with major international luxury retailers. In addition, electric vehicle operators continue to seek central locations. The Promenaden area, however, is nearly fully leased, and this could drive growth in new, nearby areas in the future as more players seek to establish themselves in Oslo.

Consumer Confidence Index (CCI), January 2024

Transaction volume 2023, share of total volume

Transaction volume 2023, bn NOK

Outlook

Looking ahead, we expect the demand for prime spaces to remain strong, and rental prices in this segment will stay at high levels. Significant market turbulence and concerned consumers, combined with the continued strength of the online shopping trend, create uncertainty for companies looking to establish themselves. In the short term, this is likely to affect the broad retail leasing market.

Read our latest market commentary on retail.