Pressure in the Norwegian and international economy has been high so far this year, and labour-market demand has been very good. The number of vacancies advertised on the FINN.no jobseekers website from 1 January to 31 March 2022 was almost 50 per cent higher than in the same period of the year before.¹ Employment growth has surged ahead, with almost 150 000 more people in work nationwide during the second quarter compared with April-June 2021. The last time we experienced a similar increase in jobs was back in 2008. That has contributed to an imbalance in the labour market, with a big gap between jobseekers and advertised vacancies.

This trend has forced the central bank in Norway, and in many other countries, to tighten monetary policy. Interest rates are rising rapidly, which has contributed in turn to most people losing faith in a soft landing. And with an energy crisis escalating in Europe, it has become highly likely that we will see many major economies entering a recession in coming quarters. This will be felt here in Norway, too, and we will probably experience a clear about-turn in the national economy next year.

Companies in the Norges Bank regional network survey expect rising prices and costs, combined with higher interest rates, to dampen activity in the time to come and lead to slower employment growth. In addition, the purchasing managers’ index (PMI) has maintained its downward trend. Norges Bank’s expectations survey showed as early as August that employment expectations are declining, and sentiment is likely to have weakened further since then. Forecasts from most of the leading analysts are unanimous in expecting flat or weakly declining employment in 2023.

A weaker labour market will unquestionably have an impact on office demand, and we anticipate that net absorption of office space will decline to around zero by next year. Demand is expected to rise gradually in 2024, with a net absorption of about 30 000 m² that year and a further 50 000 m² in 2025. If that proves the case, it will be more or less in line with earlier recoveries. Even if demand rises, it will remain lower than the average for the past 11 years. Fortunately, little newbuilding is taking place at the moment. That is moderating the downturn in the rental market.

So far, we have noted few signs that increased home working has acted as a brake on demand for office space. How far more difficult economic conditions will have an effect is an open question. On the one hand, the temptation to cut costs through more efficient use of space rises when companies encounter more contrary winds. On the other hand, it might be that employers, who want more people back in the office, will have bigger influence on developments when the labour market weakens.