Norway Real Estate Market Outlook 2020


Weak global trading conditions continue to weigh on European growth, but the Norwegian economy continues to perform well, fuelled in part by oil & gas capital investments. The main risk to Norway and the rest of Europe is an escalation of US-EU trade tensions, with further falls in demand for European exports. Despite this, the Norwegian labour market remains robust and wage growth has accelerated, providing further support to consumer demand.


The accommodative policies of the big central banks are reinforcing our expectation of Norges Bank being done with rate hikes and that interest rates now will stay lower for longer. Prime yields are essentially at their floors, although we still see potential for compression for some the very best assets to continue into 2020. Investors are increasingly favouring real estate in multi-asset portfolio allocations, so we expect 2020 investment volumes to remain near 2019.


The construction and operation of buildings contributes to around 40 percent of worldwide greenhouse gas emissions. Driven by a combination of regulatory and social pressures, we expect companies to devote more attention and rigour to ESG policies that integrate organisational, portfolio and asset level objectives. Investors, developers, occupiers and advisors, as well as asset, property, and facility managers all have a role to play in this transition.


Office-based employment growth will continue going on strong in 2020, with leasing activity remaining high, particularly in central Oslo submarkets. Supply conditions will begin to loosen, with vacancy levels likely to plateau or rise as new development completions accelerate. City level variations in these trends will, if anything, widen. Look for occupiers to take a more activist approach to their portfolios, with a growing focus on retain-reposition-dispose decisions.


The retail and logistics sectors will continue to be supported by slowing but steady economic growth. Positive retail performance will happen in more experiential subsectors, while traditional fashion and footwear will continue to struggle from the competition with ecommerce. On the other hand, logistics will continue to benefit from expanding online retail.


The rise in the scale of capital deploying into Europe’s multifamily sector in the last few years has been substantial and is set to increase in 2020 and beyond. This reflects urbanisation and demographic trends, with up to two thirds of the global population expected to live in cities by 2050, according to the UN. Currently very immature in Norway, the sector set to evolve rapidly over the coming years, and those looking to deploy need to take their cue from markets where the sector is already more mature.


Norway’s hotel market is dominated by the large, regional brands who sign long lease agreements and have nationwide networks of hotels. Business travel under corporate agreements remains the driving force for hotel market performance and growth. In 2020 and 2021, more white-label operators will open hotels in several key cities, contributing to brand diversification and more competition.