After rental prices in Greater Oslo rose by approximately 11 percent throughout 2022, rental price growth has been relatively flat so far this year. There are now several factors indicating that we have reached the rental price peak this time:

• Weak macroeconomic conditions significantly dampen rental price growth. 2024 appears weaker than six months ago. The period of flat employment growth is expected to last longer than previously assumed. Consequently, we have revised down our rental price forecasts and expect flat rental price development in 2024.

•  Tenants are more cost-conscious. Additionally, an increasing number of tenants prioritize flexibility and are less inclined to commit to long lease agreements.

• More tenants renegotiate instead of moving to new premises. A whopping 59 percent of new contracts larger than 2,500 m² signed so far this year are renegotiations. In comparison, the average from the period going back to 2015 has been 42 percent.

While price growth is leveling off, several years of significant rental price growth have resulted in high lease levels for contracts being signed now. In many cases, landlords will experience a significant growth in rent when they enter into new contracts, even though the growth is now stabilizing.

In the short term, macroeconomic conditions will be the most critical factor, and many tenants and developers will likely adopt a wait-and-see approach. Looking through the cycle, there is much to support the notion that rental prices will continue to rise. The supply side still looks very favorable. New construction activity is expected to remain low until 2026.

We believe that there will eventually be a shift in rental levels for new buildings and high-quality office spaces, driven by higher construction costs, increasing yields, and financing costs. It's no longer possible to justify projects based on the rental price levels of "yesterday." Consequently, it will become relatively more cost-effective for tenants to renegotiate in existing premises.