Office

After low activity 2023, the office property transaction market has slowly but steadily recovered, and there is better optimism as we enter the second half of the year compared to the start of 2024. At the same time, high financing costs, limited new construction, low office vacancy rates, and continued strong demand for quality spaces have kept the office property market in Oslo under pressure over the past six months.

Transaction Market

Increased financing costs and uncertainty regarding Norway's economic development impacted the office transaction market in 2023. With improved sentiment entering 2024, activity has significantly picked up compared to the first half of last year, and we have observed a few large transactions. As of August 2024, we have recorded an office transaction volume of approximately NOK 20.8 billion, which is more than double the volume for the same period last year.

Office properties remain the most traded segment in Norway but do not constitute as large a share of the total volume as in previous years. In 2024 YTD, office properties account for 44 percent of the total transaction volume. Given the developments in long rates so far this year and expected trends towards 2025, we maintain our prime yield estimate at 4.75 percent.

Rent levels for high quality office space in Oslo, NOK per square meter

Leasing Market

Activity in the leasing market has remained strong in the first half of 2024. A more limited supply side, combined with sustained strong demand, has kept office vacancy rates below the historical average of around 7 percent. As of the second quarter, we measure vacancy in Oslo at 6.3 percent, a slight decrease from 6.4 percent in the first quarter of 2024.

Rent levels in Oslo increased between 5 and 10 percent last year, with the highest increased rates in the city centre. We observe that tenants' demands for quality, location, and energy efficiency in their office buildings are continuously rising, with the highest demand for the most central office spaces. With expectations of further increases, the market rent for offices in Vika-Aker Brygge with "high standard" stands at NOK 6,300 per square meter as of the second quarter, up NOK 100 since the third quarter of 2023.

Vacancy rate Oslo average vs. Oslo CBD

Key figures

Outlook

Looking ahead, we expect rent levels to rise moderately by around 5 percent in both 2024 and 2025, with office vacancy rates remaining flat towards the end of 2025. We also believe that the supply of office space will remain constrained for some time due to several years of limited new construction, low expectations for new developments, combined with persistently low office vacancy rates.

Read our latest analysis on the office market here: Market Views, August 2024 | Office Market