As Norway’s economy cools down in the wake of lower oil prices, brokers say office leasing rates have begun to ‘fall markedly,’ especially in Oslo and Stavanger. New figures released last week show a decline of 7 percent on Oslo’s high-end west side, and 8 percent in Stavanger.
Brokers told newspaper Dagens Næringsliv (DN) last week that the slide is “the worst since the finance crisis,” which Norway actually weathered well. In November last year, the average leasing rate for a high-standard office on Oslo’s west side was around NOK 2,100 per square meter. Today the same office space is renting for NOK 1,950. In Stavanger, lease rates have delined from NOK 1,650 to 1,550 per square meter.
Lower leasing demand along with a strong supply of new office space coming on line may force some banks into logging losses on commercial real estate projects, DN reported. Vacancy rates have been rising at a time when Norwegian banks hold loans on NOK 350 billion worth of business real estate.
“The banks cushion themselves for lower leasing rates when they lend money on commercial real estate projects,” Peter Hermanrud, chief strategist at Swedbank, told DN. “They’re braced for rate declines of 10-, even 20 percent. But when entire office buildings are standing empty, the prospect of losses increases considerably.”