COVID-19 Impacts on Norway Real Estate


Hans Petter Skogstad 
Head of Research Norway / COO

The Norwegian unemployment rate is continuing to decline and measured 7.1% by the end of last week. The unemployment rate peaked at 10.7% at the end of March. We expect unemployment to continue its decline in the weeks to come as economic activity continues to normalise. 

The transaction market took a hit when authorities announced the lockdown in March. However, most large transactions are still ongoing, but will not be closed in Q2. Estimated numbers show that the volume of H1 will be approximately half of 2019 (NOK 20 billion vs NOK 40 billion). Our latest investor survey shows that investors believe that transaction volumes will be back at 2019 levels in 2021. 

We have recently completed a tenant survey among our customers. The survey shows that 54% expect to be back in normal operating activity before the 4th quarter of 2020. A majority (63%), expect smaller changes in the way offices are used. The most significant change is the increase in and normalisation of digital meetings. Furthermore, the flexibility of contracts and office solutions will be increasingly important. The big question is if COVID-19 will affect the required square footage. Our survey shows that 60% expect no change in their needs and 26% expect that their need for offices will decline.


21 May

In Norway, we celebrated our National Day on Sunday, 17 May. In Oslo's main street there is normally a parade of children with flags to greet the Royal family in front of the Royal Palace. This year the street was empty, and the King and his family drove around Oslo in an open car. Restaurants were open, but few tables were booked. The value of footfall was fully demonstrated. Daily figures for payment card usage shows that sales from F&B fell by approximately 80% (compared to the same days in 2019) when the COVID-19 restrictions started on 12 March. Between 1 and 15 May, the fall was reduced from 60% to 35%. On the other hand, DIY sales have been on average 30-40% higher than last year. 

Registered unemployment continues to decline. While it was at 2.3% in February, it rose steeply to 10.7% by the end of March. Now the rate is 7.8%. 

Inflation was measured at 0.8% in April, aided by record low electricity prices. The record low price of electricity will not continue. On top of that the exchange rate of EUR/NOK has fallen by 10-15% since February. A rate at this level will lead to increased import prices. We may see inflation at 3% by the end of the year. In Norway we have inflation-adjusted leases - another good reason to invest in CRE. 


14 May

Norway is continuing to reopen, as the Norwegian economy is recovering from its low point in April. This week the Government announced that all secondary and high schools will open before 15 May and on 1 June amusements parks can reopen. Several cinemas have stated they will reopen this week, complying with the maximum crowd rule of 50, increasing to 200 by 15 June. From 15 June fitness centres will reopen, as well as professional football leagues.  

It was expected that housing prices would take a hit in April, but the prices were unchanged for the month. The decline in mortgage rates and comprehensive public support for the ones hit by COVID-19 measures have helped with keeping the housing prices up. For foreign readers we can confirm that 82% own their own residences and are therefore free to sell.  

The Norwegian Central Bank set its policy rate to 0% (0.25%) for the first time on 7 May. Furthermore, the Central Bank stated that they believe the interest rates will remain at this level until the end of 2023. The rate on 10-year government bonds fell from 0.9% on 13 March to 0.4% on the 7 May. The decline in long government bonds as well as a functioning credit market makes us less prone to an increase in prime yield. On the contrary, it has opened opportunities for a decline in prime yield. 


7 May

In Oslo, the activity slowly begins to return to normal. Two major changes have been made by the authorities this week.

  1. Recommended distancing was reduced from 2 metres to 1 metre. This will make it easier to return to the office.

  2. Events with up to 50 people participating will now be allowed. This is positive for cultural institutions and Food & Beverages. Some cinemas will open this week.    

Registered unemployment dropped from 10.7% by the end of March to 9.4% by the end of April. We expect a further decline in May as activity increases.  

Office search-volume in the first four months was 84,000 sq m in Oslo. The number was significantly lower (49,000 sq m) in the same period last year. There have been several major office searches since the COVID-19 restrictions were introduced.  

Last week we got the results from our extraordinary (COVID-19 edition) investor survey. The results will be published this week. The survey shows that 60% of the investors plan to increase their portfolio in Norway in the next 6 months. Furthermore, half of the investors are ready to consider specific investment opportunities at this moment. This means that the transaction volume can pick up quickly when buyers and sellers have the same expectations.   


30 April

According to the Government the COVID-19 outbreak is under control. The number of hospitalised in Norway continues to fall and has not been lower since 20 March.  

Last week Norway began to reopen kindergartens. According to school leaders the opening went well. This week primary schools will be allowed to reopen across Norway for children between the ages of 6 and 11. Personal services like hairdressers, physiotherapists etc. will also open this week.  

All major festivals and concerts this summer will be cancelled. The Government announced that no events of 500 people or more will be allowed until 1 September.  In Oslo, the ban on serving alcohol in pubs will be lifted at the beginning of May meaning the pubs will be able to serve during our National Day on 17 May.  

Preliminary figures by Statistics Norway shows that GDP fell by 6.4% in March. Accommodation and food services experienced the largest decline (-30%).  

Brent spot was under USD 20 last week. Low oil prices mean lower oil investment and activity. However, the oil activity is not as important for the Norwegian economy as in earlier downturns. Less than 5% of all employed in Norway work directly or indirectly in the oil business. Recent forecasts predict that the fall in oil investment will not reduce GDP by more than 0.3 percentage points this year and next.


23 April

The COVID-19 outbreak still seems to be under control according to the authorities. There has been a fall in the number of infected people in the last 3 weeks. However, by gradually easing the restrictions there will be setbacks of daily increases. Hopefully we will find the balance between increased activity and controlling the spread. To keep a 2 metre distance from others will affect the openings of offices, retail, F&B and hotels

This week the health authorities launched an app to help limit the transmission of coronavirus. Anonymised data about movement patterns in society from the app are used to develop effective infection control measures. It will then be possible to monitor even more closely whether the measures are working, and whether infected people are in close contact with more people as society eases the measures and restrictions. 

About 60% of all office workers were still working from home in the first week after Easter. In Oslo, the share is as much as 75%. Surveys says that 80% find it more difficult to work from home. The opening of kindergartens this week will make it easier for some of them. 

The hotel industry is now focusing on domestic customers in the next months. Hopefully the borders to Sweden, Denmark and Finland will open towards the summer. The sharp fall in the price of NOK means that Norway now appears very favorable as a holiday country. 

Shopping centres revenues fell by 19.5% from February to March. The fall was expected as the measures against the spread of COVID-19 started at the end of the second week in March. 

Office rents were on average unchanged from Q4 2019 to Q1 2020. The figures may indicate that the prime premises peaked in Q4. IMF forecast a fall in Norway's GDP of 6.3% this year after a growth of 1.2% last year. 


April 16

This Easter was different from usual in Norway. Normally most of us are heading to our holiday properties, but this year we all had to stay at home.  

On 8 April, the Government presented a plan of gradually lifting the lockdown. Children’s day care centres, primary school classes for pupils in years 1-4 and out-of-school care programmes will re-open, and towards the end of April, the Government will lift the ban on people staying at their holiday properties. Hairdressers and other businesses where there are one-to-one contact, will be allowed to resume operations if they follow the requirements for infection control measures. The changes will be brought in gradually, starting from 20 April. 

As the Government eases the restrictions gradually, we will also start the process of re-opening our office in Oslo. Infection control guidelines will be strictly followed.  

Several retailers which have been closed over the last weeks have announced that they will re-open. Norwegians will probably have to stay within the country this summer. Hotels and leisure are experiencing a major increase in number of bookings for the summer holiday. Registered unemployment is highest in tourism and transport, with 26.9% of the workforce registered as fully unemployed. Secondly, managers and retail, respectively, 16.8% and 16.7%.


9 April

We are now entering the fourth week of COVID-19 measures. The measures seem to be working. The number of new confirmed cases is declining and so are the number of people being hospitalised. This week is the national Easter holiday, and usually many of us usually spend time at our cabins, but this year, we are not allowed. Yesterday, the Government released an update about the situation and presented a plan to gradually lift the lockdown later this month.

Registered unemployment has increased from 2.2% in February to 10.7% in April. The sum of people registered as fully and partly unemployed has reached 412,000 people, or about 15% of the labour force.  

Sectors such as travel and transport have been hit particularly hard, but we note that the service sector in general has been deeply affected by the coronavirus crisis.  

House prices fell by 1.4% from February to March, and the number of dwellings traded was 14% lower than in March 2019. The decline was expected, and we believe rate cuts and lower volumes made the fall less dramatic.  

A compensation scheme will provide compensation, for a period, for some of the unavoidable fixed costs of companies severely affected by infection control measures. The companies must document a fall in turnover of at least 30% in March. The feedback is mainly positive. 


2 April

According to the Government social distancing measures are working and there is still sufficient capacity to handle an increase in infected people. The authorities have given themselves a new deadline until Easter to consider a new strategy and potentially renew or change restrictions. It is expected that schools and kindergartens will partially open after Easter.  The registered unemployment rate has risen from 2.2% in February to, currently, 10.4% (S.A.). We would not be surprised to see the registered unemployment rate reached 12-13% in March. The authorities are offering a financial assistance package for businesses most affected by the lockdown (retail, F&B).   The Ministry of Finance has so far presented financial measures amounting NOK 310 billion and we expect more to come. Estimates at the beginning of last week indicate a fall in GDP of 2-4% depending on how long this situation will last. New estimates at the end of last week indicate a fall in GDP of 3-10%.  
Several major oil companies have already announced cuts in oil investments, so far 20%. M&A’s are put on hold in all markets, not only CRE. Many of our clients are ready to invest when the time is right.  


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