Rising rents

Office rents are on the way up, and a tighter market lays the basis for further growth. At the same time, great uncertainty prevails on a number of fronts.

Published 03.03.2022 15:42

Last changed 18.03.2022 09:11

We saw the full ketchup effect last year at office companies in Oslo, which experienced their highest employment growth since 2007. They remain optimistic, and demand for offices is rising. At the same time, we see that the supply of new office space will decline sharply in the time to come. This means that office vacancy, which increased less than expected during the pandemic, is likely to fall.

The market we can now see the contours of has normally yielded a nominal annual growth in market rents of five-seven per cent, something we believe will happen this time as well. At the same time, uncertainty is greater than usual. Reasons for this include the inflation picture, tighter monetary policy, rapid price rises for raw materials, and war. Much uncertainty also attaches to the way office tenants will utilise their space in coming years, even though little sign can be seen so far of lower demand for premises.

Annual nominal rent growth in Oslo

Moreover, building and conversion costs are rising at full speed because of high raw material costs, bottlenecks in global value chains and a tight labour market. In other words, some of the rent growth will be eaten up by increased outgoings.

We expect the strongest growth this year to be in the central districts, but the outlook for price rises in other areas is also positive. 

Demand for offices at Skøyen is high, for example, and rents are rising fast. Apart from the Fram project at Drammensveien 126 (about 10 500 m²), newbuilding in the area is limited. Many projects have been put on hold in anticipation of the district plan. Very little new construction is under way further west, too.

Despite much building in Oslo East during recent years, vacancy there has declined a good deal. Many potential newbuild projects have kept rents down, so higher construction costs could eventually help to give a little boost to the rent level.

Many people are concerned about how rents are developing in different districts, and variations will persist. But we believe these will primarily be internal, within each area. Generally speaking, the best performers will be properties with a good microlocation, a high standard, flexibility and a high environmental certification. In our view, therefore, the most important consideration is not whether a property is located at Lysaker, Helsfyr or Nydalen, but where it lies in its area and the standard of the building.

See our digital map for a full overview of each city district.

Average rent in Oslo (NOK/m²/year)