Big changes in recent years have left many investors and bankers sceptical about retail property, and the substantial differences found in this sector have been reinforced by the pandemic. That is reflected in the transaction volume, with big-box stores accounting for the bulk of the 19 deals done so far this year.

Prime yield for big-box retail properties has been reduced by 25 basis points to 5.25 per cent since the spring. We have left prime yield unchanged at 3.90 per cent for high-street retail properties. A big rise in the risk premium is implicit for this category since yields have declined substantially for the office and logistics segments.

*At October 2020
Source: UNION

Restaurants and most other service sectors have been hard hit by restrictions aimed at controlling the spread of Covid-19. Consumption of services in April was down by 25.3 per cent from the same month last year.¹ Despite a considerable bounce-back, August was still 13.4 per cent lower than in the same month of 2019. The decline from the year before for March-August was 17 per cent.

Source: Statistics Norway

Consumption of goods, on the other hand, has performed very well during the pandemic. Grocery, hardware and interior design shops show strong turnover figures, and have been responsible to a great extent for keeping shopping-centre sales going in recent months. Turnover in Norwegian shopping centres has risen by 3.7 per cent so far this year. Taking the 60 largest centres alone, sales increased by no less than 4.4 per cent over the same period.²

*Q1-Q3 2019 to Q1-Q3 2020
Source: Kvarud Analyse

However, big differences exist between the various centres. Rygge Storsenter and AMFI Borg in Sarpsborg have seen the strongest growth in turnover from the same period of 2019, at 31 and 26 per cent respectively.

But very positive progress has not been confined to centres near the Swedish border. Alna Centre, with easy access by car and several large furniture stores, a Vinmonopolet outlet and grocers among its tenants, saw sales rise by 20 per cent from last year.³

The story is completely different for city centre retailers. The urban outlets at Aker Brygge and Oslo City saw turnover decline by 23 and 17 per cent respectively during the first nine months compared with the same period of 2019. Advice to work from home and fewer tourists have substantially reduced footfall in the city centre.

Luxury stores in central Oslo, already affected by downtown pedestrianisation, have also felt the impact of a summer without tourists. That is nevertheless not dissuading Chanel from opening a new shop at Nedre Slottsgate 10 next year. Unlike many of the other city-centre shops, most of the stores around Egertorget and Nedre Slottsgate are categorised as “destination shopping”. But it will take a lot to compensate for a summer without foreign tourists.

However, Christmas shopping this year is expected to reach record heights because households have increased their savings. Among other factors, record-low interest rates and electricity prices, as well as “pent-up” consumption as a result of travel restrictions, have produced a sharp rise in purchasing power for many Norwegians.