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The Norwegian property market in Covid19-times

While 2020 so far has introduced new challenges due to the Covid-19 pandemic, the Norwegian property market has remained strong throughout this turbulent period with a total transaction value so far NOK 50 billion and even lower yields. The project finance facilitators remain active, buyers have no difficulties accessing capital and the key policy rate remains at zero percentage points for the time being. For the year as a whole, a transaction value of around NOK 70 billion is expected compared to about NOK 100 billion in 2019.

Still, we do see a modest fall in office rents. In the second quarter this year the average office rental price for Oslo fell by 4% and there is uncertainty regarding the development for the next 12 to 18 months.

Meanwhile, it is safe to say that the pandemic has amplified and accelerated several trends affecting real estate players. Although office is no longer king, we are now seeing an increased interest in flexible workspace with concepts like co-working and short-term leases. Another aftereffect of Covid-19 is that home offices have taken on even greater importance. Travelling to work does no longer occur every day for many employees. To a large extent these trends are expected to stay with us also after the pandemic as employers are likely to rethink their office needs. Thus, the market forecasts are predicting a lower demand in terms of office square meters than previously with regard to new office leases. Home offices and the growing need for flexibility have in turn led to an increasing interest in properties in the regional cities. And while there was general demand for properties leased out to the state or public entities already before the pandemic crisis, such properties have now with its predictable and safe cash flow become a very attractive segment in Norway for real estate investors.

All in all, it is business as usual in the Norwegian commercial property market and SVW’s real estate team is experiencing high activity these days.