Market Report
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MARKET REPORT Workplace Oo, Vitaminveien 4 2. HALF-YEAR 2016 Letting assignment on behalf of Skanska CDN MARKET REPORT 2 2. HALF-YEAR 2016 DNB NÆRINGSMEGLING We are one of Norway’s leading commercial real estate agents and the only one with offices in each of the four main cities. Our aim is to be your preferred partner and provide support with analysis, valuation, advice, letting and the purchase/sale of commercial property. Our employees have long experience and broad expertise, and are dedicated to finding the best solution for you as client. Transactions Letting Our expert team has conducted Our brokers find the best solution transactions for more than NOK 30 for clients and tenants. We focus on billion in the last three years. We letting office premises, warehouse provide support throughout the and combination properties and 3 entire process of buying or selling some retail premises. In the last three commercial property, adapted to years we have arranged leases for our clients’ preferences. We have more than 600,000 m2 of space. very good knowledge of the investor market in commercial property. Analysis Valuation Whether you are planning to develop, In a steadily more professional property purchase/sell or let commercial market there is an increasing need for property, substantial values are external valuations of property. We involved. We offer high quality advice have long experience of undertaking and analysis, which considerably valuations for portfolios, individual increases the likelihood of success. properties and development projects. Since our establishment in 2003 we We have seen significant growth in the have closely followed the market number of our assignments and are and built up detailed knowledge and one of the largest and most recognised a comprehensive set of databases. market participants. In the last three This report has been prepared by our years we have completed valuations of Analysis Department. properties for an amount in excess of NOK 200 billion. CEO’s letter 5 Summary 6 The letting market in Oslo 8 The transaction market 16 REGIONS Bergen 24 CONTENTS Trondheim 28 Stavanger 32 4 SEGMENTS Retail 38 Warehouse/logistics 40 Hotels 44 Housing 48 MACRO-ECONOMICS Macro-economics 50 The bond market 54 Employees 56 CEO’S The autumn hunting season doesn’t just take place in the mountains - there is a hunt going on for investments around LETTER the country, at the same time as property owners on their side are hunting for tenants. The situation hasn’t changed significantly since the winter, but rather has intensified. There is however a different make-up to the investors that have dominated the transaction market compared with 2015. At the Anne Helene Mortensen, Chief Executive, same time, we can confirm a positive shift in the office rental DNB Næringsmegling market in Oslo. At the start of 2016 many people felt that local and national expertise is a big plus. the market was saturated following the Ingrid E. Moe has taken over a position as hectic activity we saw throughout 2015. a letting broker in Oslo after many years as At the time of writing in October 2016 we an analyst on the office market. This means can confirm however that the number of that the letting team in Oslo now consists transactions this year will probably achieve of eight experienced advisors. Mads H. a “podium place”. In the office market in Wanderås, Ingrid’s replacement, is in place Oslo it is pleasing to confirm that vacancy is and has already started work on an analysis falling and rents are up. of the office market in Oslo. Also in Oslo the fifth and sixth members of the transaction You now have in front of you DNB team have joined and we’re pleased to have Næringsmegling’s fresh market updates on board Bjørn Olav Smørgrav (from DNB as at the beginning of October. This is Markets) and Henrik Baardsen (from Pangea supported by underlying analysis of the Property Partners). The transaction team in movements we see in the market. We are Oslo is thus fully equipped for the future with proud to be able to look back over a long a combination of experienced brokers and history at the same time as we analyse advisors with a background from finance. trends and look forward. We see that today’s property transactions In DNB Næringsmegling we wish to provide are becoming steadily larger and more our customers with tailored reviews of complex and involving an increasing the market. We prepare a large number proportion of institutional investors from of analyses that we do not publish. This both Norway and abroad. In arelight autumn, among others, we have studied of this in DNB Næringsmegling we are equity issues and the investment plans of strengthening our cooperation, particularly the equity funds, international funds as well in connection with purchase assignments, as Norwegian fund managers. with DNB Markets, which is a market leader in capital market activities (bonds and Three quarters of the transaction market equities) in Norway. DNB Markets for its takes place in and around the four largest city part has increased its focus on commercial regions, and our offices in Oslo, Trondheim, property as an asset classes in recent times. Bergen and Stavanger work closely together to carry out assignments together where DNB is thus a one-stop shop within appropriate. In this way clients can get the commercial property - with advice and best price for properties they are selling broking for purchases/sales/letting as well as because we have been able to present them analysis and valuations, not to mention debt to local, national and international investors. and equity capital solutions and M&A. Several leading clients confirm that the interaction that they experience between Good hunting! SUMMARY HIGH RETURN AND PRIMARILY GOOD OUTLOOK 2016 is proving better than expected for property investors, who are on course for a third year of outstanding returns. There are however large geographic variations and in several segments around Norway the letting markets are challenging. Overall however, commercial property has a reduced downside risk this year and in general terms a primarily positive outlook. • Falling yield trend and high CPI growth are contributing to a high return this year. • The oil market is in better balance and there is less risk of continuing low prices. This reduces the risk of a long- lasting economic downturn in Norway. DNB Markets expects that the Norwegian economy will gradually strengthen and return to its trend growth in 2019, something which again indicates a reduction in letting risk. 6 • The office segment in Oslo constitutes a large proportion of many portfolios and vacancy here has been on a falling trend over the last year. Market rents are now increasing for the first time since the autumn of 2014. • Office vacancy is 10% or higher in Bergen, Trondheim and Stavanger and RevPar in Stavanger in the first half-year was down by 43% compared with the same period in the peak year 2013. Economic situation and the been the largest net buyers this year. The DNB The transaction market impact on commercial property group has contributed both through increased lending and through the life insurance Many investors face challenges in finding The Norwegian economy is characterised company’s increased bond purchases. In property to buy and arrangers, purchase by weak growth, but expectation indicators several local markets we see that participants advisors and investors are active in show that business now considers without established bank relationships that approaching owners with purchase enquiries. prospects to be a little brighter. Property wish to invest in property with an ordinary Demand is concentrated on Oslo, the investors can derive some comfort from level of risk face challenges in obtaining other main cities and properties that give the fact that DNB Markets has increased its finance. Credit margins have risen a little over a predictable return. 2016 is likely to be the growth estimates for CPI by a total of 2.3 the last year, at the same time as floating third year running with more than 200 percentage points for the present 3-year interest rates have trended lower. transactions. Compared with 2015 there have period compared with the corresponding been fewer large portfolio transactions and forecast last winter. After three outstanding Yield development international investors have to a lesser extent return years, macro forecasts suggest now been able to satisfy their requirements. that from next year broadly composed Continuing excess demand is still pushing property portfolios will see a moderate yields lower. Properties with long leases The office market in Oslo return in line with the direct return. have been traded over the last year in the range 5.00 to 5.50% at places such A low level of construction, a high volume Loan financing as Elverum, Lillehammer and Haugesund. of conversions and moderate growth in the International investors with moderate debt amount of leased space has contributed to We have for the most part a well-functioning levels or 100% equity finance have shown office vacancy being on a slightly falling trend loan market for commercial property, the most willingness to purchase at higher since the peak in the autumn of last year. The something that is reflected, among other prices in Oslo, where the prime yield has current level is 8.3% of total office space and our things, by the fact that the arrangers have been reduced to 3.85%. forecasts indicate that the level will fall to 7.1% by the end of 2019. Data from Arealstatistikk (fewer purchase approaches) has contributed private consumption now shows a growth suggest that market rent levels are now rising to the three cities in total only having about rate of only 2.3% on average for the years for the first time since the autumn of 2014.