Logistics Market Report 2017 Greater Oslo Area Colliers international Logistic Market report 2017 The current market situation is that the appetite The vacancy rate within this market has fallen Summary from both domestic and foreign investors further and is currently just above 8 %. The regarding this sector is huge. The transaction decrease of approximately 2 percentage points volume thus far this year, also suggests that it will is significant and not surprising. A considerable surpass the strong years of 2014, 2015 and 2016 amount of old obsolete stock is removed from the in terms of both volume and share of transaction market, either for conversion or it is not actively total. The attractiveness of the logistics market is marketed any longer. While the vacancy rates This is the third annual Logistics report provided by boosted by long leases and single tenants which has decreased, it is important to note that there Colliers International on the Greater Oslo logistics is both highly desirable amongst most investors are several possible new developments currently in this day in age. Our projection is however that being actively marketed which is not included in market. In that timeframe, we have seen the prime the yield has slowly started to bottom out and the vacancy rate. yield for the logistics sector drop from 6 % to 5 %, we do not foresee such a sharp decrease in the yield level for our 2018 report. A 5 % yield in the Aleksander Gukild significantly more compared to both the office and logistics market is also quite the barrier and we Head of Research retail sectors´ yield development in the same time remain hesitant to suggest that this barrier will MOB +47 92 61 53 38 be broken for the duration of 2017. [email protected] period. 2 For 2017 as a whole, we do expect a transaction volume for the logistics sector of close to NOK 10 bn which would be a record high. This does however hinge on a variety of factors, where the most important one would be willing sellers. Investors are undoubtedly eager and waiting for prospective possibilities. At present, the accumulated volume of 2017 if around NOK 5 bn for the logistics sector. The rents however has been stagnant for quite some time and 2017 is no different. The prime rent which is found in Groruddalen, remains at NOK 1 250,- per sqm. There is some upwards potential and it is a possibility that the prime rent will increase beyond NOK 1 300,- per sqm going forward. However, we have currently not seen enough evidence to alter our stance compared to last year. Colliers international Logistic Market report 2017 Macro economy The Norwegian economy is recovering from the effects GDP Mainland CPI % % of the oil downturn and the scarce growth in global 3 4 rent rent demand. The Norwegian economy continues to be 3 heavily reliant on the petroleum business and the 2 “­­oil-fund” continues to support a growing portion of 2 1 the Norwegian GDP. The economical downturn has now 1 lasted for nearly three years. However, it is becoming 3 0 0 increasingly apparent that the tide has turned and that 2013 2014 2015 2016 2017 (e`) 2018 (e`) 2019 (e`) 2020 (e`) 2013 2014 2015 2016 2017 (e`) 2018 (e`) 2019 (e`) 2020 (e`) Source: Statistics Norway Source: Statistics Norway Norway is set up for strong economic growth going forward. This view is supported by most experts in the field. Unemployment % 5 rent The Norwegian GDP growth was 0,9 % in 2016 Currency 4 according to Statistics Norway. This figure is The Norwegian NOK has in general been 3 however expected to increase closer to 1.8 % in somewhat strengthened by the improving oil price 2017 and further on towards 2,4 % in 2018 and and macro conditions. At year end, the NOK was 2 draws a very positive image for the Norwegian trading at roughly 9 against the € Euro and even economy. Other sources and experts are below, which was for the first time in roughly 18 1 frequently suggesting even higher growth in the months. However, the NOK has decreased as of 0 coming years. This underpins the perception that late (mid April) and is currently trading at levels 2013 2014 2015 2016 2017 (e`) 2018 (e`) 2019 (e`) 2020 (e`) the Norwegian Economy is likely to pick up the around NOK 9.15 per 1 € Euro. Furthermore, al Source: Statistics Norway pace and that there are exiting times ahead. though not at peak levels, the NOK is currently Colliers international Logistic Market report 2017 very weak compared with the USD $ when the petroleum sector as it is expected that the reviewing it in a historical perspective which investment will bottom out in 2017. Also, the is in part fueled by the Americans increasing cost of developing an oilfield has sunk by 40 % their interest rates twice within a relatively compared to 2014. Also, mainland Norway is short period of time as well as “Trumpism”, in projected to perform quite well in the year of addition to a generally weak NOK. Before the 2017 in terms of investment and also a slight recent fall of the NOK in the past month, an increase in exports. The unemployment rate is increase was widely expected. However, the last expected to stay at the current level during the months decrease has made the road ahead more course of 2017 and further down into 2018 and uncertain. Our main scenario remains that the 2019. NOK will increase against most other currency going forward in 2017 and especially in 2018. Oil Price The oil price increased quite considerably towards CPI the end of 2016 and has since remained between CPI continuously surprised on the “upside” in $ 50 and $ 60 per barrel. At the time being (early 2016 and the end level forecasted was suggested September) the oil price is hovering around $ 55, to be the highest number for several years. The after a recent increase after the summer. After 4 CPI levels for 2016 ended up at 3.6 % – well OPEC and other major oil producing countries has beyond comparable data for other Western engaged in several agreements as of late, the oil European countries as well as way above price is according to most experts within the field, estimates from the start of the year. Going likely to continue to increase throughout 2017 and forward however, the expectation is that the beyond. annual increase will go back to levels close to the inflationary goal of the Bank of Norway which is 2.5 % in the next few years. The ­­CPI-ATE for 2016 ended up at 3 %, a figure which is expected to decrease significantly in 2017. As of September 2017, the CPI level is 1.5 %. Unemployment The unemployment rate is as of the start of September 4,3 % which is a steady decline since the turn of the year. The overall trend is that the unemployment rate will continue to decrease going forward, although at a rather slow pace. This is due to factors such as a recovery in within Colliers international Logistic Market report 2017 Makro Indicator Export % 6 Makro Indicator 2013 2014 2015 2016 2017 (e`) 2018 (e`) 2019 (e`) 2020 (e`) 5 GDP, Mainland 2,3 % 2,20 % 1,10 % 1,00 % 2,00 % 2,00 % 2,40 % 2,40 % GDP 1,00 % 1,90 % 1,60 % 1,10 % 1,80 % 1,80 % 2,20 % 2,30 % 4 CPI (JAE) 1,60 % 2,40 % 2,70 % 3,00 % 1,60 % 1,70 % 1,60 % 1,60 % 3 Household Consumption 2,70 % 1,90 % 2,10 % 1,50 % 2,40 % 2,40 % 2,90 % 2,80 % 2 Public Consumption 1,00 % 2,70 % 2,10 % 2,10 % 1,90 % 1,70 % 1,80 % 2,20 % 1 Investments, Oil & Gas 19,3 % -3,20 % -15,00 % -16,90 % -0,30 % 0,20 % 8,20 % 3,00 % 0 Export -1,70 % 3,10 % 3,70 % -1,80 % 1,60 % 1,60 % 2,60 % 2,50 % 2013 2014 2015 2016 2017 (e`) 2018 (e`) 2019 (e`) 2020 (e`) Export, Oil & Gas -5,50 % 1,90 % 3,2 % 4,30 % 1,40 % -0,40 % 1,00 % 2,30 % Export Traditional Goods 1,30 % 3,1 % 5,80 % -8,20 % 2,00 % 5,00 % 3,30 % 2,60 % 5 Import 4,90 % 2,40 % 1,60 % 2,30 % 4,90 % 2,00 % 2,70 % 2,70 % Import Traditional Goods 2,30 % 2,10 % 1,90 % -0,40 % 5,50 % 3,10 % 3,90 % 3,80 % Unemployment 3,50 % 3,50 % 4,40 % 4,70 % 4,20 % 4,10 % 4,00 % 3,90 % Import GDP Mainland Employment (level) 71,2 71 71,2 70,7 70 70,2 70,4 70,6 Household Disposable Income 3,80 % 2,70 % 5,20 % -1,60 % 2,20 % 2,90 % 2,80 % 2,80 % % % 6 6 Household Savings Rate 7,60 % 8,20 % 10,40 % 6,90 % 6,50 % 6,90 % 6,90 % 7,30 % 5 5 Money Market Rate (level) 1,8 1,70 % 1,30 % 1 % 0,90 % 0,80 % 0,80 % 1,20 % Consumer Price Euro-area 1,30 % 0,40 % 0,10 % 0,30 % 1,60 % 1,40 % 1,70 % 1,90 % 4 4 Salary 3,90 % 3,10 % 2,80 % 1,70 % 2,40 % 3,00 % 3,20 % 4,00 % 3 3 Residential Prices 4,00 % 2,70 % 6,10 % 7,00 % 5,00 % -4,80 % -1,20 % 1,20 % 2 2 CPI 2,10 % 2,00 % 2,10 % 3,60 % 2,10 % 1,90 % 1,70 % 1,90 % 1 1 0 0 2013 2014 2015 2016 2017 (e`) 2018 (e`) 2019 (e`) 2020 (e`) 2013 2014 2015 2016 2017 (e`) 2018 (e`) 2019 (e`) 2020 (e`) Source: Statistics Norway Colliers international Logistic Market report 2017 one of the buildings may provide a very high Areas Overview and vacancy rate, only to decrease drastically For the purpose of this report, we have included when the specific letting situation is resolved.