The Norwegian Commercial Property Market

Transcription

1 The Norwegian Commercial Property Market Autumn 2017

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5 The Norwegian Commercial Property Market This market report is intended to provide an overview of the Norwegian property market. The report highlights important trends and gives specific examples of transactions in the leasing and investment markets, important new property developments, etc. This report is intended for general information and is based upon our own material which we believe to be reliable or material supplied to us. Whilst every effort has been made to ensure its accuracy and completeness, we cannot offer any guarantee that factual errors may not have occurred. Akershus Eiendom takes no responsibility for any damages or loss incurred owing to the inaccuracy or incorrectness of this report. This report was last edited on September 26th, For further information please contact Akershus Eiendom AS. Comments, suggestions or questions regarding the contents and presentation of this report are welcome at

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7 Table of Contents 6 Main Points Macro Economics 8 The Norwegian Economy The Oslo Office Market 12 Overview of the Market 14 Rent Levels 18 Survey of Tenants Relocating 22 Vacancy 26 Development 32 The Investment Market 36 Regional Property Markets 42 International Office Markets 46 The Retail Market 50 The Hotel Market 54 The Logistics Property Market 58 The Residential Market 61 Definitions 62 Akershus Eiendom AS

8 Main Points 6 Main Points The Norwegian mainland GDP growth for 2017 is now estimated to be 2.0 %, slightly up from the previous estimate. The main reason for the improvement is a growth in residential investments, but this is forecasted to decline somewhat from 2018 onwards. Oil investments are expected to rise from Oslo office rents have started rising in 2017, initially at a modest pace. The rents are forecasted to rise stronger from the fall, and probably fastest in the city centre. Our annual survey of trends among Oslo office users changing locations show a reduced push for space efficiency, plus a divergence between large and small tenants; the largest are shrinking and the smaller are growing. The office construction volume in Oslo is still limited, and we have again adjusted our estimates for slightly downwards. New construction in 2020 should therefore be higher, as several tenants are still searching for new space. Oslo office vacancy stands at 7.1 % as of August Due to low supply, we forecast the vacancy to decline to below 6 % during During the three first quarters of 2017, the commercial property transaction volume is close to 50 bnok. This implies that we are on track to a full year volume of 80 bnok or higher, thus surpassing the 2016 volume. Cross-border investments are between 20 % and 25 % so far in Throughout the year, our prime yield estimate at 3.75 % has been confirmed. The investor side has shown improved strength, with multiple national buyers raising new funds, plus international buyers showing renewed interest. Transaction volumes in the secondary cities Stavanger, Bergen and Trondheim are all solid, and yields are mostly unchanged. Most buyers are local or national. Office leasing markets are stable but still weaker than Oslo. Norwegian consumer confidence has been rising throughout 2017, and year-on-year retail sales increased by 4 % in July. The activity in the retail property transaction market has picked up somewhat compared to the same period in So far in 2017, the hotel market is growing, but at a slower pace than one year ago. Prices have risen more than occupancy, and the growth since last year is mostly happening in domestic business travel. The logistics transaction yields have edged slightly downwards, to a prime level of 5.0 %. The leasing market is stable and vacancy relatively low. Since the first quarter, the sales volume of new homes in Norway has declined, but is still at a level close to 2015 volumes. Thus, construction activity will go down from mid Prices have edged downwards in the same time period, but the transaction volume of used homes is mostly unchanged since last year.

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10 Macro Economics 8 The Norwegian Economy As of early September, a highly expansive fiscal and monetary policy, weak krone and strong growth in home construction have contributed to a slowly accelerating economic growth, and a 2017 growth which is stronger than expected six months ago. Low interest rates and high growth internationally are contributing to the upswing. According to Statistics Norway (SSB), the Norwegian mainland economy expanded by 1.1 % in For 2017, it is estimated that GDP will grow with 2.0 %, and in 2018 GDP growth is forecasted to be slightly higher, at 2.1 %. A slightly stronger krone, and a decline in house building, are expected to keep the growth relatively modest. Six months ago, 2018 growth was forecasted to be 2.4 %. The oil investments have so far fallen by a third from the peak in 2013, this continues in 2017 but with a slower pace according to SSB. But already in 2018, the investments in oil will no longer decline further, and in 2019 and 2020 the volume is estimated to rise with a 8.2 % and 3.1 % respectively. Traditional export growth in 2015 was 5.8 %. Expected traditional export growth for 2016 and 2017 is -5.1 % and 3.0 %, respectively. The household savings rate estimate for 2017 is 6.5 % and for %. According to SSB, residential prices rose by 7.0 % from 2015 to 2016, the forecast for 2017 is to rise by 5.0 %, but for 2018 and 2019, -4.8 % and -1.2 % are the expected numbers. The decline in prices is already observed on a month-by month basis. Norwegian unemployment increased to 4.7 % in 2016, coming from a very low level, but has declined somewhat over the last few months. The level of unemployed (AKU) in June 2017 was 4.3 %, which means that 119,000 people were unemployed. It is estimated by SSB that it will decline to 3.9 % in Nominal wages increased by 1.7 % in 2016, and SSB forecasts a rise of 2.4 % in 2017 and 3.0 % in CPI adjusted for tax changes and excluding energy products (CPI-ATE) were in August 0.9 % and CPI before adjustments 1.3 % as well. Oslo Stock Exchange (OSEBX) has so far in 2017 (Mid-September) increased with 11.6 %.

11 Macro Economics 9 01 Key Economic Indicators Level NOKm Annual Change (%) * 2016* 2017F 2018F 2019F 2020F Gross domestic product ,7 1,0 1,9 2,0 1,6 1,0 1,8 2,2 2,3 GDP mainland Norway ,8 2,3 2,2 1,4 1,0 2,0 2,1 2,4 2,4 Consumption in households etc ,5 2,7 1,9 2,6 1,5 2,4 2,4 2,9 2,8 General government consumption ,6 1,0 2,7 2,4 2,1 1,9 1,7 1,8 2,2 Gross fixed investment ,6 6,3-0,7-4,0-0,2 4,2 1,6 1,9 2,4 Exports ,4-1,7 3,1 4,7-1,8 1,6 1,6 2,6 2,5 Crude oil and natural gas ,5-5,5 2,7 2,1 4,3 1,4-0,4 1,0 2,3 Traditional goods ,2 1,3 3,1 6,9-8,2 2,1 5,0 3,3 2,6 Imports ,1 4,9 2,4 1,6 2,3 4,9 2,0 2,7 2,7 Traditional goods ,6 2,3 2,1 3,2-0,4 5,5 3,1 3,9 3,8 Prices CPI 0,8 2,1 2,0 2,1 3,6 2,1 1,9 1,7 1,9 CPI-ATE 1,2 1,6 2,4 2,7 3,0 1,6 1,7 1,6 1,6 Housing Prices 6,7 4,0 2,7 6,1 7,0 5,0-4,8-1,2 1,2 Employment Unemployment rate (% of work force) 4,7 3,2 3,5 3,5 4,4 4,7 4,2 4,1 4 3,9 Employed persons (percentage change) ,1 1,1 1,2 0,4 0,3 1,0 0,8 1,0 0,9 Participation rate (level) 71,5 71,2 71,0 71,2 70,7 70,0 70,2 70,4 70,6 Interest rates 11.sep year Government Bond rate (%) 1,50 2,13 3,00 1,54 1,48 1,66 1,50 Money market rate (level) (3M NIBOR) 0,78 2,2 1,8 1,7 1,3 1,1 1,0 1,0 1,1 1,4 Statistics Norway As of September 2017

12 Macro Economics Key Interest Rates % 8 % 7 % 6 % 5 % 4 % 3 % 2 % 1 % 0 % E 2018E 2019E 2020E Jan 03 Jul 03 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 NIBOR 3 months SWAP 10 years 10 year Gov. Bond Norges Bank, Sight deposit rate DNB Markets 03 Change in Total Employment Norway E Employees, thousands Change, % 0,7 % 1,9 % 2.0 % 1.7 % 2.9 % 2.7 % 0.9 % 0.6 % 0.3 % 0.4 % -1.2 % 0.5 % 1.3 % 3,4 % 4.1 % 3.2 % -0.5 % -0.5 % 1.5 % 2.1 % 1.1 % 1.2 % 0.3 % 0.2 % 1.0 % 0.8 % 1.0 % 0.9 % 4 % 3 % 2 % 1 % 0 % % % National employment change %, right axis Employment change %, SSB forecast 10 year Total employed Norway, thousands, left axis Total employed, SSB forecast Statistics Norway

13 Macro Economics Main Indices Oslo and London Index, 2004 = Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Oslo Stock Exchange (OSEBX) London Stock Exchange (FTSE 100) London Stock Exchange/ Oslo Børs 05 Exchange Rates Index, 2005 = USD/NOK EUR/NOK Norges Bank

14 The Oslo Office Market 12 Overview of the Market The Oslo office building stock, including Lysaker/Fornebu, today stands at around 8.6 million m 2. Of the total volume, roughly 3.3 million m 2 are situated within the city centre. The city centre office areas are marked in the map as seven areas/circles, from Solli Plass in the west to Bjørvika in the east. Since 2007, the city centre has seen major urban redevelopment. Two new neighbourhoods at the waterfront, Tjuvholmen and Bjørvika, have been developed to become mixed residential and commercial areas. Bjørvika still has ongoing large development projects, and in the longer term, Filipstad just west of Tjuvholmen will be available for massive commercial and residential development. Generally, Oslo has a great deal of urban sprawl, and the built-up area covers significant land areas compared to its population size. Most of the office building stock is concentrated in densely built areas, and this is visible in the map. Office zones outside the Central Business District are generally found along the outer ring road from Lysaker through Nydalen, Hasle- Økern and Helsfyr-Bryn to Ryen. All areas have seen new development over the last 10 years, and Fornebu and Nydalen have seen the highest activity. The area between the CBD and the outer ring road (in the map, seen as the Inner city West, North and East) is mostly in use for residential, education and retail purposes. The west of Oslo contains high-end residential areas with low density. The northeastern corner of Oslo is the core area in all of Norway for logistical purposes, with many distribution centres for retail, wholesale and third-party logistics companies. Eastern and southern areas mainly consist of residential areas with varying degrees of density. In most areas outside the major office hubs, we see slow but steady conversion of older office buildings into residential development projects, as these are generally more profitable than refurbishment for continued office use.

15 The Oslo Office Market The Oslo Office Areas Oslo Outer West Majorstuen Ullevål Sinsen Storo Kjelsås Grefsen Nydalen Inner City North Økern Oslo Outer East Alna-Ulven Skøyen Inner City West CBD Inner City East Helsfyr-Bryn Lysaker Ryen Oslo Outer South Fornebu m² m² m² Akershus Eiendom

16 The Oslo Office Market 14 Rent Levels STATUS The consensus rent estimates from Dagens Næringsliv for the first half of 2017 (see figure 09 and 10) show an increase in all sub-areas, given that some of the previous data series have been stopped. The positive increase in the rent levels is a result of several big contracts expiring in combination with record low net new construction of office space. Among all the sub-areas, Skøyen is the area experiencing the highest increase, supported by steady take-up and falling vacancy rate. Since our last report, several notable new leases have been signed: NAV (Norwegian Labour and Welfare Administration) have signed approximately 20,600 m² in Fyrstikkalléen 1, a new office development at Helsfyr. This project is now almost fully let, as Lånekassen (Norwegian State Educational Loan Fund) also signed 4,200 m². Skøyen has experienced good activity since our last report, with Hafslund signing 11,000 m² in Møller Eiendom s new development Harbitz Torg, and Verisure moving into new premises at Drammensveien 211. Additionally, Sofies Minde have signed new space at Fram Eiendom s new development located in Østensjøveien 16 at Bryn. For more details about new constructions, please refer to the chapter Developments. TRENDS As of September, approximately 380 companies are actively in the market for just above 825,000 m² of office space in Oslo. The ten largest of these companies are looking for almost 193,500 m² of office space, equivalent to almost 25 % of the total active search. Of the top ten, approximately 60 % are government or municipal agencies with contracts expiring within the next three to four years. The expiry profile of the biggest tenants within the greater Oslo area still implies that demand for new office space will be greater than the supply in the medium-long term. This is a supporting indicator of rents continuing to increase going forward. In summary, we have already seen increasing rent levels in most parts of Oslo, a trend we expect to continue throughout 2017 and the start of For the prime CBD areas, we expect the rent to see a significant increase over the years to come, as have happened in Stockholm in recent years. The main reason for this is the increasing focus on effective utilization of office space, and the willingness to pay for extra services. For the CBD areas, Majorstuen and Nydalen we still forecast the rental growth to be in the interval %, as stated in our previous report, and we expect rental growth in 2018 to exceed 10 % for some of the same areas. The factors mentioned above low new supply, and a likely high volume of demolition and conversion to residential purposes are especially strong in these areas. Especially, the CBD is benefiting from the increased trend of less car commuting and more train/subway transport, plus the desire for an urban environment surrounding the workplace.

17 The Oslo Office Market Oslo Office Rents August 2017 Nydalen Sinsen Storo Kjelsås Grefsen Oslo Outer East The map shows office rent levels for high-standard units larger than 500 m² in different parts of Oslo, as of August Oslo Outer West Ullevål Inner City North Alna-Ulven Hasle-Økern Majorstuen Skøyen Inner City West CBD Inner City East Helsfyr-Bryn Lysaker Ryen Fornebu Oslo Outer South Rent, NOK/m²: General high standard / Top standard and new space Akershus Eiendom / / / / / / / Oslo Office Leasing Examples Property/location Owner Tenants ~Floor space, m² Area Harbitz Torg Møller Eiendom Hafslund 11,000 Skøyen Drammensveien 211 Realkapital Investor AS Verisure 4,000 Skøyen Dronning Eufemias gate 42 Wahl Eiendom Vipps 1,650 CBD Universitetsgata 8 KLP Eiendom Legalis 1,600 CBD Kirkegata 15 Kirkegaten 15 DA Grant Thornton 1,500 CBD Vitaminveien 4 Skanska Helsedirektoratet 11,150 Nydalen Fyrstikkalléen 1 J.B. Ugland, and more NAV 20,600 Helsfyr Fyrstikkalléen 1 J.B. Ugland, and more Lånekassen 4,200 Helsfyr Østensjøveien 16 Ferd Eiendom Sofies Minde 4,400 Bryn Ole Deviks vei 6 Søylen Eiendom Tradesolutions 1,500 Bryn

18 The Oslo Office Market Year-End Rent Levels The table shows year-end rent levels based on signed contracts, both new signings and renegotations Prime 2,100 2,700 3,900 3,750 2,700 2,850 3,100 3,400 3,750 3,800 3,750 3,850 High std CBD 1,700 1,900 2,300 2,300 2,200 2,350 2,550 2,850 2,900 2,900 2,800 2,900 Newer space CBD 1,900 2,000 2,600 2,600 2,500 2,550 2,650 2,850 2,900 2,900 2,800 3,000 Good std CBD 1,300 1,400 1,900 1,900 1,850 1,900 2,250 2,250 2,400 2,450 2,400 2,600 High std Skøyen ,450 2,650 2,700 2,550 2,600 High std west fringe 1,400 1,750 2,200 2,200 1,900 1,900 1,900 1,900 2,100 2,100 1,800 1,800 High std east fringe 1,150 1,300 1,550 1,650 1,550 1,650 1,650 1,700 1,800 1,800 1,800 1,900 Older, ineffective space Sources: Dagens Næringsliv Akershus Eiendom 10 Office Rents NOK / m 2 / year Nominal NOK The figure shows rent levels based on signed contracts, both new signings and renegotations H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H1 Prime High std CBD Newer space CBD Good std CBD High std Skøyen High std west fringe High std east fringe Older, ineffective space Sources: Dagens Næringsliv Akershus Eiendom

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20 The Oslo Office Market 18 Survey of Tenants Relocating Summary of survey structure Akershus Eiendom has executed its 14th annual survey of companies or government / municipality agencies currently relocating. The respondents either have signed a new lease contract during the year, or are in the process of finding new premises. The survey is designed to map the demand side of the office market, and collects a solid sample of observations of current trends in the market. The survey provides a forecast for actual new absorption in the coming 6-18 months, as few have relocated at the time of the survey. In 2017, the 60 tenants surveyed are in the process of acquiring 329,500 m² of office space in Oslo. The survey covers around % of the tenants searching for new premises (due to size and availability). The survey was performed during the first weeks of September. Assumptions and implications Figure 11 shows the Tenant New Demand Index, which is the total relative change in the office space demand of the 60 companies in the survey. This year, relocating tenants on average need 6 % less office space. In our previous surveys, a few large companies skewed the results. This issue is not that prominent in the 2017 survey trends are distributed more evenly across the sample. However, we observe a clear division in our sample between smaller and larger companies: Organisations currently occupying more than 5,000 m 2 are on average reducing their future offices by 11 %. Organisations below 5,000 m 2 are planning to increase their offices by 10 %. This correlates with figure 14, which shows that over 50 % of the companies in our survey are seeking to increase their staff in the coming years up from 30 % in After recording the highest proportion of tenants planning to reduce their office space in 2015 (45 %), the same number decreased to 37 % in 2016 and to 35 % this year, as can be seen in Figure 12. In 2017, 38 % are searching for or have signed more office space, which is twice as many as Figure 15 shows that 48 % of the tenants plan to rent less space per employee in their new offices. This is visibly lower than the previous four years. From 2010 to 2015 the trend of reducing office space per employee gained traction. Back in 2010 only 30 % of the respondents planned to increase their seating efficiency, while more than 60 % answered the same in Now that the trend of adopting open plan offices has been common for some time, a larger portion of companies searching for office space this year might already be seated quite efficiently. Hence the increasing portion of companies responding, no change. The efficiency trend is now also common in larger government and municipality organisations and more conservative businesses, which keeps demand for new and efficient office space high.

21 The Oslo Office Market Sum of all tenants moving: change in demand for space, compared to old location The figure shows the change in demand for space when comparing the future requirements for space to the amount of space the tenants currently occupy. 30 % 20 % 10 % 0.0 % change % -10 % -20 % Akershus Eiendom 12 Moving to bigger or smaller space? 80 % 70 % Share of office space The figure summarizes the number of tenants planning for larger, less or the same amount of office space than they currently occupy. The figure does not weigh the responses by the size of their office space. Out of the survey participants, 35 % are planning to reduce their office space, while 38 % of the participants are planning to expand. Of the companies reducing future office space 71 % claim it is due to more efficient office premises, rather than reductions in staff. 60 % 50 % 40 % 30 % 20 % 10 % 0 % Larger office space Same amount of space Less office space Akershus Eiendom

22 The Oslo Office Market Surveyed Tenant s Change in Demand for Space The figure plots each surveyed tenant s (those below 5,000 m 2 ) change in demand for space. The X-axis represents current office space and the Y-axis represents future office requirements. Tenants placed below the 45 line demand less office space than they currently have, while tenants demanding more office space are located above the 45 line

23 The Oslo Office Market Increasing or reducing Staff The figure shows the expected development in the number of staff employed. 52 % of the respondents report that they are experiencing increases in staff, an increase from the all-time low 2016, but on level with 2014 and % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % Reducing staff No change Increasing staff Akershus Eiendom 15 Change in space per employee; new location versus old location The figure summarizes the respondents plans for office space efficiency in new office spaces relative to their current premises. The number of respondents planning on reducing office space per employee is still high at 48 %, but lower than the 5-year average. Many companies have already adopted open plan offices, which might explain why 48 % plan to do no changes to their seating efficiency. 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % Less space per employee No change More space per employee Akershus Eiendom

24 The Oslo Office Market 22 Vacancy VACANCY H As of Q3 2017, Oslo office vacancy measured as floor space available now or within three months stands at 7.1 %, which is equivalent to 612,000 m². This is on par with the previous three quarters, but down 1.2 %-points from the 5-year peak in July 2015, as shown in figure 17. Oslo city centre, currently at 5.1 %, has experienced a larger decrease in vacancy than the city as a whole. We have not made significant changes to our predictions that vacancy will continue its declining trend in the coming years. Tight supply prolonged One of the most important factors for future vacancy will be the short supply of office space in 2018 and Multiple projects previously believed to materialise over this period have been pushed out in time. Some will be completed in 2020, such as Fyrstikkalléen 1, where NAV (the Norwegian labour and welfare organisation) and Lånekassen (public student loan provider) have signed to move in. Another factor underpinning a tight supply of future space is the slightly declining, but still high residential prices in the Oslo real estate market. We observe that undeveloped land plots in Oslo in many cases are still more attractive for housing than for commercial property. Also, conversion of office space into other purposes remains attractive both because a) tenants seek central locations to a wider extent than before and b) proposed area plans by the Municipality of Oslo favour residential development close to the largest office hubs. Our estimate of office space being converted into other purposes has been revised up from 120,000 m² to 140,000 m² in 2017 and then stable at 120,000 m² in The 2017 revision is due to specific projects, while the long-term estimate has been revised down due to a slowdown in the market for new homes. Slightly increasing demand After three consecutive years of rising national unemployment, we have observed a decline from 4.9 % to 4.3 % the last 12 months (SSB). Recent forecasts predict that absolute employment, the key factor for absorption of office space, will have a slightly positive development. We predict that future vacancy will decrease for the years , but at a slightly slower pace than our previous predictions. See figure 17 for a year-by-year forecast for the Oslo vacancy rate. Risk Vacancy risk, measured as possible vacant space within two years, is generally low for all areas. As can be seen in figure 18. The risk is highest in the city centre. Vika/Aker Brygge and CBD northeast being the likeliest areas for higher vacancy in the short term. High vacancy risk in the most central areas is not new due to the high turnover rate, and this has been the case for the last five years.

25 The Oslo Office Market Oslo Office Vacancy Nydalen Sinsen Storo Kjelsås Grefsen Oslo Outer East This map shows office vacancy in the various areas of Oslo as of July Space counted is available at the latest by September 30. Oslo Outer West Majorstuen Ullevål Inner City North Økern Alna-Ulven Skøyen Inner City West CBD Inner City East Helsfyr-Bryn Lysaker Ryen Fornebu Oslo Outer South <15 % <10 % <7,5 % <5 % <2,5 % Akershus Eiendom m² office space 17 Oslo Office Vacancy E The columns show how vacancy changes due to demand. The forecast of new demand and supply are based on knowledge about specific office developments and the official estimates for employee growth. Our forecast indicate a slight decrease in office vacancy in the coming years given today s expectations of future demand and a relatively modest supply of new space up until E 2018E 2019E 2020E 2021E 11.0 % 7.0 % 4.5 % 5.0 % 8.0 % 8.0 % 7.0 % 6.5 % 7.0 % 8.0 % 7.5 % 7.0 % 6.0 % 5.5 % 5.0 % 5.5 % Actual Forecast Vacancy level by the start of the year Net new office space added Change in demand (absorbed space) Sources: Akershus Eiendom Various developers

26 The Oslo Office Market Vacancy Risk The map shows the risk of future vacancy within each sub-area of Oslo in the coming two years. The analysis is based on known volumes of office space entering the market during the period, either through new vacant buildings or because the tenant moves out. The analysis does not take into account the effects of tenants moving between sub-areas; it is solely a supply-side risk analysis. Oslo Outer West Lysaker Skøyen Ullevål Majorstuen Inner City West Nydalen Inner City North CBD Sinsen Storo Kjelsås Grefsen Økern Inner City East Oslo Outer East Helsfyr-Bryn Ryen Alna-Ulven Fornebu Oslo Outer South High risk Medium risk Low risk Akershus Eiendom

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28 The Oslo Office Market 26 Development NEW OSLO OFFICE PROJECTS Major new office buildings announced since our last report are: Møller Eiendom s Harbitzalléen 3-7 located at Skøyen totaling 30,000 m², Freserveien 1 in Inner City East with a size of approximately 25,000 m², ROM Eiendom s 21,000 m² office development in Oslo CBD and Fyrstikkalléen 1 developed by Vedal comprising 32,000 m² at Helsfyr. See table 18 for a complete list of new developments in the period OFFICE VOLUME FORECASTS For 2017, we expect 86,000 m² of new office space to enter the market, which is up from 72,000 m² in For 2018, known new developments are 130,000 m², which is also the total estimate for 2018, as there is not time enough to increase this. For 2019 we expect 150,000 m 2 of office space to enter the market, of which 66,000 m 2 is already announced. This is a forecast reduction of 50,000 m 2 or 25 % since our spring report, and this is a major reason to expect falling vacancy. We have revised our 2020 construction volume estimate slightly upwards to 225,000 m 2 due to the postponement of some projects which were previously estimated to be completed in We see a lot of large tenants searching for new space, but many of these are delayed, and the competition for these tenants is strong in the market for new projects. On the other hand, we expect a conversion of office space to other use of approximately 120,000 m² during the years to come. This has also been revised slightly downwards due to the slowdown in the residential market. However, the changes even out, and net new supply of new office space is expected to be low for the coming two years. Developers with projects in the CBD are expected to start the projects without any tenants, but the volume of such projects is limited due to a lack of zoned projects. The office projects in the fringe areas, which are larger and more numerous, will generally be on hold until at least one-third of the volume has a signed tenant. If the economic growth is stronger than expected, this will create a shortage of good space. CONSTRUCTION TRENDS Graph 20 shows Akershus Eiendom s estimated turnkey cost for new office buildings in Oslo, which has remained stable since early 2014 and is currently at NOK 20,500 per m² office space. We do not observe a significant rise in construction costs, which is somewhat unexpected, as the increased construction volume has now surpassed that of 2007, when a sharp rise in construction costs was observed. Our forecast is therefore for stable costs for the rest of Graph 21 shows the order backlog for the Norwegian construction industry. The volume is now at a record high level, mostly due to the growth in residential construction. This is expected to change, as the sales of new homes has declined since March on a year-on-year basis, and this will affect the volume of new projects. For commercial construction, however, some growth can be expected.

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30 The Oslo Office Market New Office Buildings Kemneren 2017: 86,000 m² 2018: 130,000 m² 2019 (known): 72,000 m² Elkjøp Vitaminveien 4 Securitas The map shows the location, year of completion, leasing/vacancy situation and relative size of the ongoing or in other ways confirmed office construction projects in Oslo. The names are either the address, project name, or tenant name where the project has one major tenant. Harbitz torg Nemko Orkla Cort Adelers gt 33 Sundtkvartalet Torggata 15 DEG 6b Diagonale Eufemia Omsorgsbygg NAV Freserveien 1 Schweigaards gt. 33 Ulvenvn. 90 Trebygget Valle Østensjøvn. 16 Nils Hansens vei 25 - KRIPOS Occupied Vacant New buildings 2017 New buildings 2018 New buildings Akershus Eiendom 20 Available Land Plots for Office Development in Oslo Potential size, floor space m²: m² m² m² m² Available now or within 4 years Long-term development potential, less certainty Akershus Eiendom

31 The Oslo Office Market New Major Oslo Office Projects Property/building Floor space m² Area Completion Developer Ulvenveien 90 6,000 Alna-Ulven 2017 Oslo Trelastkompani LTD AS/ Stor Ulven Holding AS Nydalsveien 24 7,000 Nydalen 2017 Avantor Hagaløkkveien 26 14,500 Asker 2018 Ferd Eiendom Bøkkerveien 5 (Securitas) 12,000 Økern 2018 Höegh Eiendom Drammensveien ,500 CBD East 2018 Orkla Eiendom Dronning Eufemias gate 7 (Diagonale) 15,200 CBD East 2018 Hav Eiendom / Olav Thon Philip Pedersens vei 11 6,300 Lysaker 2018 NCC Vitaminveien 4 17,000 Nydalen 2018 Skanska Grenseveien 80 8,000 Helsfyr-Bryn 2018 Bunde Eiendom Valle - "Trebygget" 5,700 Helsfyr-Bryn 2018 NCC Schweigaardsgate 33B 22,500 CBD East 2018 ROM Eiendom Eufemia Bjørvika 21,000 CBD East 2019 Oslo S Utvikling Harbitzalléen ,000 Skøyen 2019 Møller Eiendom Østensjøveien 16 11,000 Helsfyr/Bryn 2019 FRAM Eiendom Fyrstikkalléen 1 32,000 Helsfyr 2020 Vedal Freserveien 1 25,600 Inner city east 2020 OBOS Forretningsbygg 22 New Office Space m 2 Completed new office space in Oslo (including Fornebu). Only certain new buildings is included in the 2017 figures E 2016E 2017E 2018E 2019E 2020E West East CBD Estimate (all areas) Akershus Eiendom

32 The Oslo Office Market Estimated Turnkey Cost E NOK / m 2 Akershus Eiendom s official estimate of turnkey cost is based upon information from recent initiated projects and input from valuations Value index for backlog Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Jan 18 Jul 18 Estimated future construction cost Observed construction cost Akershus Eiendom 24 Order Backlog New Buildings Nationwide Quarterly index The graph shows the order back log for new buildings. The graph has been deflated by the total production index to remove effects of changes in building costs (basic component costs) and changes in margins to contractors National index, all new and exisitng buildings incl rehab projects New residential buildings Other new buildings (mainly commercial) Statistics Norway

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34 The Investment Market 32 The Investment Market Performance The 2017 transaction volume as of 15 September amounted to NOK 50 billion (only deals above NOK 50 million where a majority stake was transacted are included in the statistics). This represents an increase of nearly 22 % from the NOK 41 billion registered at the same point in The number of transactions recorded has also increased substantially. The 2017 volume is recorded across 183 transactions, a 45 % increase from the 126 transactions making up the 2016 volume. More than 50 % of the national transaction volume stems from the Oslo market, with investment volumes recorded as of 15 September totaling NOK 26.9 billion across 71 transactions. The same figures for 2016 were NOK 20 billion across 55 transactions. This represents a 35 % increase in transaction volume and a 29 % increase in number of transactions. A key development in the Oslo market has been the reduction of the yield gap between CBD assets and fringe location assets. While the spread was in the bps range at the beginning of 2017, recent transactions indicate that the spread is currently decreasing, with some deals trading in the bps range above prime. We see strong volumes in all segments office, retail, logistics, land plots etc. The strong residential sales in 2016 has caused a new wave of residential land plot sales, as most of the large and small residential developers have depleted their land plot banks. Bank margins have increased marginally throughout 2017, while the 5Y and 10Y SWAP rates (1.42 % and 1.88 % as of 14 September) have remained mostly stable since January 2017 following an increase through Interest rates are expected to remain low, with the Norwegian Central Bank expecting the key policy rate to remain at the current 0.5 % for most of 2017 and 2018, before gradually increasing in Bond financing, and direct loans, continue to be a vital part of the financial structure for some transactions, while banks report a stable demand for commercial property loans. Foreign investments Foreign investors continue to be active in the Norwegian market, driven by the persistence of the low interest rate environment globally, coupled with the weak Norwegian krone. Their awareness of Norway is supported by the rise of the Nordic commercial real estate market, which is currently the third largest market in Europe measured in transaction volumes. As of 15 September, foreign investors have acquired commercial real estate for NOK 10.6 billion, making up 22 % of the investment volume. In the same period, they have divested NOK 1.6 billion. Corresponding figures for 2016 where NOK 7.8 billion acquired (17 % of investment volume), and NOK 4.4 billion divested. Outlook We expect total 2017 investment volumes to be somewhat higher compared to 2016,

35 The Investment Market 33 at above NOK 80 billion, as the market activity has increased in august and September, with many known mandates and deals in the market expected to close before year-end. The prime yield estimate remains unchanged at 3.75 %. As written in our Spring 2017 report, we expect to see upward pressure more than downward pressure on the prime yield level in 2018 as a whole, as the already low interest rates provide restraints on downwards pressure. However, as has been the case since 2015, the constraint on the supply side for high quality, centrally located assets remains. If interest rates and margins do rise, we expect more owners to enter the market to divest. While increased financing costs should, alone, lead to upward pressure on yields, the competition for high quality assets may result in yield pressure in the opposite direction. The forecast for the coming 6 months is thus for an unchanged prime yield level. development is expected to also apply to regional cities moving forward, granted that the right investment opportunities hit the market. As investors seek returns in the prevailing low interest rate environment, we expect that many will find returns outside of Oslo CBD attractive, and will as a result venture into these markets, driving yields downwards. Oslo fringe yield levels are expected to continue to be under pressure. This

36 The Investment Market Transaction Volume of Commercial Properties NOK Million Only deals larger than NOK 50 million are incuded in the graph. Transaction volume in 2016 was NOK ~80 billion. As per 15 September, 2017 volume totals NOK 50 billion % 7.50 % 7.00 % 6.50 % 6.00 % 5.50 % 5.00 % 4.50 % 4.00 % 3.50 % 3.00 % 2.50 % 2.00 % 1.50 % 1.00 % 0.50 % Jan 02 Jul 02 Jan 04 Jul 04 Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul YTD Commercial land plots Residential projects Logistics / industrial properties Hotels Retail properties Office buildings Akershus Eiendom 26 Interest Rates and Transaction Yields The curve indicates the 10-year government bond rate and the 10-year SWAP rate. The triangles represent time and sales yield for large Oslo office transactions since Jan Transaction Yield 10Y SWAP 10Y Gov. Bond Akershus Eiendom

37 The Investment Market Sellers and Buyers of Commercial Property % 2 % 10 % 9 % 11 % 6 % 3 % 2 % 47 % 4 % 4 % 24 % 3 % 1 % 22 % 10 % 24 % 8 % 3 % % 13 % 1 % 2 % 11 % 7 % 11 % 7 % 31 % 4 % 8 % 7 % 16 % 5 % 4 % 20 % 9 % 26 % 4 % 8 % Sellers Buyers Listed property funds Property companies Insurance/Pension funds Property funds Closed-end funds Owner occupied Private investors Government Hotel operator/owner Foreign investors Remaining Akershus Eiendom 28 Oslo Office Transactions Property/location Floor space m² Price NOK million Kongens gate 8 / Kirkegata 9 19, Telenor Eiendom Closed-ended fund by Arctic Securities St. Olavs gate 23 4,548 n.a. CapMan Real Estate Aberdeen Lakkegata 55 31,300 1,590 Skanska (50 %) Entra ASA (50 %) Thorvald Meyers gate 2A 6,750 n.a. Closed-ended fund by Pareto Victoria Eiendom Akersgata 32 2, Entra ASA Edgewater AS Lilleakerveien 2 A-F 40,000 1,245 Nordea Liv Mustad Eiendom Ruseløkkveien 26 55,000 n.a. Storebrand (50 %) Aspelin Ramm (50 %) Strandveien 12 4,450 n.a. AVA Eiendom Selvaag Eiendom Ensjøveien 23B 3, Ferd Eiendom Lerka Eiendom Mariboes gate 13 13, Klaveness Genesta (Nordic Real Estate Fund II) Eufemia 22,600 1,740 Oslo S Utvikling KLP Eiendom Wergelandsveien ,340 n.a. Catella Real Estate AG Canica Myntgata 2 13, Oslo Kommune Forsvarsbygg, Skifte Eiendom Fredrik Selmers vei 2 13, Closed-ended fund by Clarksons Nordea Liv Platou Nils Hansens vei 25 20,700 1,020 Pecunia Eiendom Closed-ended fund by Arctic Securities Dronning Eufemias gate 30 49,150 4,300 Meteva AS (Trond Mohn) Samhällsbyggnadsbolaget i Norden AB (SBB) Seller Buyer

38 Regional Property Markets 36 Regional Property Markets Bergen The transaction market in Bergen has continued its strong trend in The total transaction volume so far in 2017 stands at close to NOK 4 billion divide amongst 16 transactions. The expected transaction volume for the year is NOK 6 billion. The yield on the best objects are still in the area %, while there have been several transactions with yields in the area 6 7 %. Yields are expected to stay on these levels during H The leasing market has been stable during 2017, and the vacancy has remained at 10 % since our last report. The highest vacancy is still observed in the Sandsli and Kokstad area, were premises are offered at a discount. Trondheim The Trondheim transaction market is currently driven by active buyers, especially syndicates. The transaction volume totaled NOK 3.3 billion in the first half of 2017, compared to a full-year volume of NOK 4.3 billion in Prime yield currently stands at 4.75 %, down 0.25 %-points since our last report. There has been a downward pressure on rents in fringe locations around Trondheim over the last year. However, CBD office rents remain stable. In the interval 1,000 1,950 per m² per year. Office vacancy has been steady just below 9 % during 2017 and stands at 8.8 % as of Q The vacancy is highest in the fringe areas, especially around Sluppen, Fossegrenda and Tiller, south of the city centre. 81,000 m² of new office space is entering the market in 2017, 16,000 m 2 in 2018, while at least 40,000 m² office space is expected in This is more than the expected new demand, and leads to increased vacancy. Stavanger The Stavanger transaction market still sees healthy demand overall, however, investors seem to favour Stavanger CBD, while Forus is deemed less attractive, due to high vacancy risk. The transaction volume during 2017 currently stands just above NOK 3 billion divided on eight registered transactions. Prime yield stands at 5 %, whereas a more normal yield is around 8 %. Continuingly high vacancy in the region still put downward pressure on rents. Shortterm contracts with high flexibility for the landlord has been registered as low as below NOK 1,000 per m², even for high standard premises. However, prime rent in the CBD remains at NOK 2,600 per m². The vacancy in the city center currently stands at 5 %. The vacancy in the Stavanger region is down 0.3 %-points to 10.9 %, whereas the office vacancy at Forus currently stands at 14.8 %, down from 15.6 %. There is still low new building activity in the region. Changes in vacancy is therefore expected to come from change in demand for office space and conversion of older inefficient buildings.

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40 Regional Property Markets Year-End Office Rents Bergen 1,350 1,500 1,500 1,475 1,475 1,475 1,475 1,475 1,475 1,505 1,485 Trondheim 1,600 1,650 1,600 1,600 1,650 1,700 1,700 1,700 1,723 1,631 1,631 Stavanger - CBD 1,600 1,700 1,650 1,600 1,650 1,800 1,950 1,950 1,950 1,783 1,755 Stavanger - Oil (Forus) 1,300 1,400 1,350 1,300 1,300 1,400 1,500 1,500 1,347 1,195 1,093 Kristiansand 1,450 1,575 1,500 1,400 1,400 1,375 1,400 1,400 1,400 1,400 1,300 Tromsø 1,200 1,300 1,300 1,400 1,450 1,450 1,650 1,650 1,722 1,770 1,937 Dagens Næringsliv 30 Regional Office Rents NOK/m 2 /year Nominal NOK H H H H H H H H H H H H H H H H H H H H H H H1 Bergen Trondheim Stavanger - CBD Stavanger - Oil (Forus) Kristiansand Tromsø Dagens Næringsliv

41 Regional Property Markets Office Rents January Office rent, NOK per m 2 Bergen Trondheim Stavanger The columns show lower and higher rents for different areas within the three cities. Bergen rents are more uniform than Stavanger and Trondheim CBD Fringe CBD Fyllingsdalen Sandsli CBD Fringe CBD East South CBD Forus Tananger Best rent levels Lower rent levels Sources: Eiendomsmegler1 Midt-Norge Eiendomsmegler1 Rogaland Kyte Næringsmegling 32 Regional Office Vacancy % 10 % 8 % 6 % 4 % 2 % 0 % 03 Oct 04 Feb 05 Jan 05 Sept 06 Feb 06 Sept 07 Jan 07 Aug 08 Jan 08 Aug 09 Jan 09 Aug 10 Jan 10 Aug 11 Jan 11 Aug 12 Jan 12 Aug 13 Jan 13 Sept 14 Jan 14 Sept 15 Jan 15 Aug 16 Jan 16 Aug 17 Jan 17 Aug Bergen Trondheim Stavanger Sources: Eiendomsmegler1 Midt-Norge Eiendomsmegler1 Rogaland Kyte Næringsmegling

42 Regional Property Markets Leasing Property / location Floor space m² Rent / m2 Lease Tenant Owner STAVANGER Kanalsletta 3 3,000 Sola Kommune Union syndicate Koppholen 20 2,000 Starwood Halvorsen tech Lagerveien 13 6,000 Lyse Elsnett Lagerveien 13 AS TRONDHEIM Brøsethvieen 166 3, Microchip KLP Ranheimsveien 9 3, Atea Kaisa Holding AS Sluppenveien 19 3, Sweco Kjeldsberg/Veidekke Sluppenveien 19 3,000 Confidential Veidekke Kjeldsberg/Veidekke BERGEN Kanalveien 7 2,100 1,825 Multiple tenants Kanalveien 7AS Krinkelkroken 2,500 2,800 Two tenants (avg.) Nordea Grieg-Gaarden 1,600 2,200 Grieg Media City Bergen 1,700 Confidential Entra 2,000 Confidential Entra Marineholmen 1,870 2,350 Rieber Marineholmen 6,500 Confidential Rieber Solheimsviken 1,900 2,100 Rieber Kronstadparken 600 1,900 Bara Kokstadvegen 23B 6,000 1,350 Aibel 34 Sales Property / location Floor space m2 Price, MNOK Buyer Seller STAVANGER Aftenbladet (Nykirkebakken/Verksgaten) 777 Storebrand Union syndicate Kverneland bilbygget(vestre svanholmen 9-11) 755 Pareto syndicate Ådne Kverneland Elixia/Jula bygget(gartnerveien 4) 275 Union syndicate Syndicate by Svein Kåre Edland Havnespeilet(rådhusgata 3) 262,5 Nordea Liv Ivar Gundersen st TRONDHEIM Falkenborgveien 28 10, DnB Markets Realinvest AS Haakon VII`s gt. 25 8, Frost Eiendom Citycon Sluppenveien 17A, B og C 21, Pareto Kjeldsberg Tungasletta 10 17, Clarkson Platou Lerka Eiendom m.fl. BERGEN Langarinden 16 8, Hitec Vision EGD/Base Haukås Næringspark - 3 bygg 13, DTZ Profier m.fl Myrdalsvegen 22 7, Hemfosa DNB Rosenkrantzgate 3 12, Bergen Hotel Gruppen DNB Øyrane Torg 13, DNB Nistad Gruppen Olav Kyrresgt , Nordea Teigland Eiendom Sandsliåsen 59 3, Selvaag Bolig Rasmussen Eiendom "Tine-eiendommen" 26, Bonava Tine Spelhaugen 22 6, Odfjell Eiendom Bergen Næringsbygg

43 35 New Building / Rehabilitation Floor space m² Completion Developer Tenant TRONDHEIM Brøsethvieen April 19 KLP Eiendom Microchip, and more Ranheimsveien N/A Kaisa Holding Atea Sluppenveien May 19 Kjeldsberg/ Veidekke Sweco, Veidekke Eiendomsmegler 1 Midt-Norge Eiendomsmegler 1 Rogaland Kyte Næringsmegler

44 International Office Markets 42 International Office Markets NORDIC OFFICE MARKETS The Nordic property markets continue to perform well, with strong interest in the transaction market, stable or falling vacancy rates, and rising rents in most markets. The supply of office space in Stockholm is still quite low, even though the vacancy rate has increased by 0.2 %-points during the first half of 2017, and now stands at 7.6 %. The vacancy rate in the CBD remains at 3 %, putting pressure on the prime office rents. Prime rents continued its positive development during the spring, increasing by 10 %. Prime office rent is now SEK 6,800 per m², while the rent for the absolute best office spaces is approaching SEK 9,000 per m². The strong rental growth has spread to other submarkets. The transaction market remains strong and the transaction volume reached SEK 24.7 billion during H1 2017, and the prime yield estimated is down 0.25 %-points to 3.5 %. The demand for office space in Copenhagen is still directed towards the prime segment, even though the market for affordable space with good infrastructure is growing. The vacancy rate stands at 9.6 % for greater Copenhagen, while the vacancy rate in the CBD stands at 6.8 %. Prime rents are still in the interval DKK 1,400 1,850 per m², while rents in secondary locations are in the interval DKK 1,100 1,250 per m² looks to be yet another record year in the transaction market. Objects with stable, long-term cash flows are still highly sought after, however, there is an increased demand for secondary objects which now offer an attractive yield premium. Prime yield remained at 4.0 % during H During H1 2017, the long-term trend of increasing vacancy rates shows sign of peaking on the back of an improving rental market, reflecting the positive development in the Finnish economy. A net negative supply of office space during H has also had a positive impact on the vacancy rate, which currently stands at 14.7 %. After a long stable period, prime rents are starting to increase, and currently stands at 384 per m², while rents in other submarkets are still lagging. After a record high transaction volume during H2 2016, the activity in the market is now back to a more normal level. This is not due to a lack of interest, rather the absence available objects. The transaction volume during H reached 430 million, while the prime yield estimate fell by 0.25 %-points to 4.0 %. EUROPEAN OFFICE MARKETS The Jones Lang LaSalle Office Clock describes the European market situation by a quarterly plot for the movement in prime rents for major cities. The clock illustrates both direction and speed of change for the different cities over 6 months. The rental growth in Stockholm and Copenhagen is still slowing down, while rents in Helsinki are accelerating. Oslo is currently at the 06:15 position, representing the slow but steady positive change during mid-2017.

45 International Office Markets European Offices Property Clock Q2, 2017 London City, Lyon Cologne Dublin Dusseldorf, Hamburg Copenhagen, Manchester, Prauge Budapest, Edinburgh, Frankfurt, Munich, Stuttgart Stockholm Luxembourg, Paris CBD Rental Growth Slowing Rents Falling Barcelona, Berlin, Madrid Rome Amsterdam, Milan Brussels, Helsinki, St. Petersburg Rental Growth Accelerating Rents Bottoming Out Istanbul London WE Lisbon Oslo Geneva Warsaw Athens, Bucharest, Kiev, Moscow, Zurich JLL Akershus Eiendom 37 Key Information Nordic Cities Q2, 2017 Key Data Oslo Stockholm Copenhagen Helsinki Gothenburg Prime Yield ( %) (CBD) Rest of Inner City ( %) Prime Rent (Local Currency / Euro / m²) (CBD) 4,200 / 448 6,800 / 712 1,850 / ,200 / 335 Submarkets (Local Currency / Euro / m²) 2,500-2,800 / ,000 / 461 1,100-1,650 / ,600 / 272 Completions (m²) (Total) 86,000 69, ,000 58,000 17,800 Completions (m²) (Total) 130, , ,000 52,000 15,600 Completions (m²) (Total) 72, ,000 85,000 46,500 Vacancy rate ( %) (Total) Sources: JLL Akershus Eiendom

46 International Office Markets Nordic Office Rent Development /m 2 /year Nordic Vacancy Development 20 % 18 % 16 % 14 % 12 % 10 % 8 % 6 % 4 % 2 % 0 % Oslo prime rent Helsinki prime rent Stockholm prime rent Copenhagen prime rent JLL Akershus Eiendom Q Q2 Oslo vacancy rate Helsinki vacancy rate Stockholm vacancy rate Copenhagen vacancy rate JLL Akershus Eiendom

47 International Office Markets Nordic Yield Development 7.50 % 7.00 % 6.50 % 6.00 % 5.50 % 5.00 % 4.50 % 4.00 % 3.50 % 3.00 % 41 Prime Value Index Prime rent/prime yield /m Oslo prime yield Helsinki prime yield Stockholm prime yield Copenhagen prime yield JLL Akershus Eiendom Q Q2 Oslo value Helsinki value Stockholm value Copenhagen value JLL Akershus Eiendom

48 The Retail Market 46 The Retail Market Status Retail sales volume (excluding motor vehicles) is up 3.85 % year-on-year by July 2017 and the long-term trend in retail sales has shown a steady increase since autumn last year. The consumer confidence index (CCI) has continued to increase in 2017 and rose to 13.4p in July. The CCI is now at ten-year-high levels and is more than two standard deviations above the historical average. The high level indicates strong consumption in Norway going forward. The shopping centre market According to Kvarud Analyse, Norwegian shopping centres have experienced a moderate growth during the first seven months of However, Virke expects a higher growth rate for the second half of the year, and holds a steady estimate of 4 % growth for Online sales continue to gain market share in the Norwegian market during the first half of 2017, and according to the latest report from DIBS, e-commerce turnover is expected to increase by more than NOK 14 billion compared to Since 2013, turnover in e-commerce has increased by approximately 75 %. The Oslo high-street market The retail prime rent levels are more or less unchanged since our last report, and the upside potential for prime rent is considered as limited in the short term. The retail market is experiencing a correction with low activity in the leasing market. However, rent levels for adjacent and secondary locations to the prime retail area are expected to increase going forward. Vacancy in the prime retail area is still close to zero, and demand for attractive retail space continues to exceed supply in Karl Johans gate. The prime shopping area is expected to expand into the area south of Karl Johans gate in the coming years. The retail investment market The Norwegian transaction market continues to experience high demand for retail properties. So far in 2017, more than 40 retail property transactions amount to approximately NOK 10 billion, which is about 20 % of the transaction volume year to date. Glastad Holding and Fortus have sold the 16,000 m² outlet village Norwegian Outlet at Vestby for ~NOK 1.1 billion to VIA Outlets, a pan-european venture formed by APG, Hammerson and principals from Meyer Bergman and Value Retail. DNB Scandinavian Property Fund acquired the 18,300 m² shopping centre Øyane Torg, located in Arna right outside Bergen for ~NOK 600 million from Nistad Gruppen. A Colliers International Corporate closedended fund acquired the retail and office property Storgata 5-7 located in central Oslo for NOK 222 million.

49 The Retail Market Norwegian Retail Volume Index Retail volume index Retail year-on-year growth 10 % 8 % Season adjusted volume index, 2010= % Retail sales has shown a steady increase since autumn 2016 and is up 3.85 % year-on-year % % 90-3 % 80-5 % Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Retail year-on-year growth Retail volume index Statistics Norway 43 Retail Construction m 2 /year Annual 4 quarter moving average Started retail construction in both Norway as a whole and Oslo in increasing while permitted and completed are decreasing Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 Permitted Norway Started Norway Completed Norway Permitted Greater Oslo Started Greater Oslo Completed Greater Oslo Statistics Norway

50 The Retail Market Prime Rent for Unit Shops Oslo, Karl Johans Gate m 2 /year Prime rents for unit shops stable at 23,500 per m² Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 Akershus Eiendom

51 45 Retail Rents in the Karl Johans Gate Area Akershus Eiendom 46 Retail Rents in Bogstadveien / Hegdehaugsveien Akershus Eiendom

52 The Hotel Market 50 The Hotel Market Performance The national hotel market is still going strong, and the most notable change for 2017 is an increase in RevPAR. The average RevPAR in July was NOK 560, up NOK 34 or 6 % from The entire growth is due to the Average Daily Rate (ADR) rising, to NOK 997 for July, while occupancy rates (OCC) were unchanged at 56 %. RevPAR in Oslo was up 9 % to NOK 601 as of July, as the OCC increased with 5 % to 73 %, while the ADR increased 4 % to NOK 820 in July. Thus, Oslo is slowly increasing its market share compared to the rest of the country; for all of 2016, it was 22 %. Demand and supply The weak Norwegian krone fuelled solid growth in the hotel market in 2016, but so far in 2017 (up to July), the effect has not continued. Total guest nights for 2017 increased 1.8 % compared to the same period of 2017, totalling 13.6 million guest nights for the period January-July. The course and conference sector fell by 4.3 % in the same time frame, while other business-related stays increased by 5.0 %. Leisure-related guest nights increased by 1.1 %. Foreign guest nights accounted for approx. 29 % of the total guest nights with 4.0 million stays, and saw a 2.1 % decrease for the year. Domestic guest nights increased 3.5 %. The short version is that most of the increase was Norwegian business travel, which closely follows the increased GDP growth. However, a 3-week hotel strike in early 2016 also impacts these numbers and makes the growth somewhat less impressive. Oslo guest nights increased 9.1 % in the same period January to July compared to 2016, to 2.8 million, fuelled by a 17 % increase in holiday/recreational stays. Oslo also experienced 6 % decrease in course and conference related stays and 1 % growth in other business travel. Most of the growth was caused by domestic guests with a 13 % increase, while international guests increased by 3.3 %. Graph 46 shows the development in hotel construction; the activity has been rather high after a slow period from 2013 to There are a few new projects in the pipeline since our previous report, but most of these are extensions to existing hotels. Thon Hotels has proposed a major new hotel as a part the Gunerius shopping centre redevelopment close to Oslo Central station; the size has not been determined, but most likely in the room range, to be completed around The same chain has proposed to extend Thon Hotel Opera also right next to the Oslo central station with 190 rooms. Both projects are subject to new zoning and might not be as large as proposed.

53 The Hotel Market Volume of Guest Nights in Norwegian Hotels No. of guest nights per month in thousands (1 000) The graph shows the split between the volume of foreign and domestic guest nights in all hotels of Norway. Figures are seasonally adjusted Domestic guests Foreign guests Statistics Norway RevPAR Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 48 Real RevPAR The graph shows the development in real RevPAR in today's values. All figures are seasonally adjusted. Oslo Norway Statistics Norway

54 The Hotel Market Hotel Construction m 2 /year Annualized 4-quarter total Permitted and started hotel floor space for Norway and Oslo are increasing after several years of low activity. Completed space remains low for Norway as a whole, while Oslo has seen some completion the last 18 months Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 Permitted Norway Started Norway Completed Oslo Permitted Greater Oslo Started Greater Oslo Completed Greater Oslo Statistics Norway 50 Hotel Transactions Since Spring 2017 Report Property/location Rooms Price NOK Seller Buyer million Dr. Holms Hotel, Geilo 127 n.a. Frydenbø Eiendom Erling Falch Monsen (Bergen Hotell Gruppen) Quality Hotel Entry, Mastemyr 155 n.a. Strawberry Properties Midstar Grand Hotel Åsgårdstrand 78 n.a. Olav Thon Eiendomsselskap Unike Hoteller Quality Pond Hotel, Sola/Forus 184 n.a. Base Property (50 %) Strawberry Properties (50 %) Oppdal Turisthotell Wenaasgruppen Private investors Comfort Hotel Fosna, Kristiansund Wenaasgruppen Hoemgruppen Scandic Bystranda, Kristiansand Familien Reme Ivar Mjåland Amalie Hotell, Tromsø 48 n.a. Tor-Ragnar Fjelstad Viking Eiendom Kragerø Resort 235 n.a. Private investors (80 %) Fredensborg Eiendom (80 %) Strand Hotel Fevik 90 n.a. Bundegruppen Classic Norway Eiendom Trysil Hotell & Restaurant Norlandia Eiendom Torgalup Bardøla Høyfjellshotell 125 n.a. Private investors Merkantilbygg Ambassadeur Hotel / Globus Hotel 300 n.a. Anker STI Utstillingsplassen Fagerborg Hotel (most likely residential conversion) 46 n.a. Tosterud family Axer Eiendom

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56 The Logistics Market 54 The Logistics Property Market Since our previous report published in autumn 2017, we have not changed our view on Greater Oslo logistics rent levels. The different rent levels can be seen in the map, where prime rent still stands at 1,200 NOK/m² per year. Observed rent levels are high from Berger to Vinterbro, as these hubs are very popular. Their closeness to effective intersections with the main highway E6, short driving distance to Oslo and the availability of vacant land plots make these hubs a good alternative to the relatively fully developed area around the Alnabru national cross dock terminal (Alna/Nyland). The historical activity in the leasing market has been high, and during 2017 we will see approximately 145,000 m² of new space entering the market. The corresponding figures for 2018 and 2019 are, per September, approximately 40,000 m² and 55,000 m². There are few new projects since our previous report; we have observed just one new construction south of Oslo; finished in The vacancy in the greater Oslo region measured as floor space available now or within 3 months, stands at 4 %, up 50 basis points since our previous report. There are, however, local changes in vacancy. The greater northern region has increased its vacancy rate with 1.3 percentage points, while the vacancy in the greater southern region is practically unchanged. The vacancy level in the western region is up 1.6 percentage points, and the vacancy level within the Oslo City limits is slightly down with 0.4 percentage points. The vacancy rates for the northern, southern, western regions are 4 %, 5.8 % and 7.3 %, respectively. The vacancy rate for space within the city limits is 2.2 %. As commented in earlier reports, we now see that new developments are starting to make an impact on vacancy, yet not enough to put pressure on rent levels. The transaction market continues in the same pace as witnessed in 2016, and we have up to now (early September 2017) registered 30+ transactions with a total volume of more than NOK 4.9 billion, which also includes land for logistics and industrial purposes. Since our previous report, Bulk Infrastructure has sold Bølerveien 77 located at Berger, Hennes & Mauritz International has sold Bølerveien 44 located at Berger, the new warehouse constructed for Bane Nor at Gardermoen has been sold, and Onninens HQ located at Berger has been acquired by Fabritius. At the same time Castelar Corporate Finance has bought Gunnar Knudsens veg 90 in Skien, Asset Buy Partners has bought GE s main facility located in Dusavika (greater Stavanger), and Selvaag Bolig ASA has disposed Maria Dehlis vei 40 located in Oslo. The above mentioned is only a small selection of the recent activity; several other deals are still bound by confidentiality. Based on recent market activity, we have lowered our prime yield estimate with 25 bps to 5.0 % for a 10-year investment grade property. The yield estimate is relevant for properties within the prime and secondary areas, from Berger to Vinterbro. The yield estimate for investment grade properties with substantially longer leases, within the same geographical region, is somewhat lower.

57 The Logistics Market Rent Levels September 2017 Gardemoen Kløfta Berger Lillestrøm Groruddalen Oslo West Other Other Oslo Regnbuen / Berghagan Ski Vestby Rent NOK/m 2 for Normal - high standard / Top-standard and new build Akershus Eiendom

58 The Logistics Market Prime Rent for Warehouse/Logistics Greater Oslo region, NOK/m 2 /year Prime rent, seen in the central parts of Groruddalen close to the Alnabru rail terminal, is at NOK per m² Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 Akershus Eiendom 53 Logistics Construction Annualized 4-quarter total m 2 /year A upswing is seen in started and completed projects in the Greater Oslo Region Q1 02 Q1 03 Q1 04 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15 Q1 16 Q1 17 Q1 Permitted Norway Started Norway Completed Norway Permitted Greater Oslo Started Greater Oslo Completed Oslo Statistics Norway

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60 The Residential Market 58 The Residential Market Residential prices The growth in Norwegian residential prices has ceased for now, and since April the average of all residential prices has dropped by 3 % according to Real Estate Norway. In the same period, residential prices in Oslo has decreased by 7 %. The recent decline is partly due to a new government regulation designed to curb accelerating home prices which caps home loans at 5 times the consumer s personal income. Still, y-o-y the average residential prices have increased by 3 %. The residential price development in the largest cities has been rather similar over the last year. Oslo has the highest y-o-y growth with 3.2 % measured August to August. Trondheim and Tromsø followed with growth of about 2 % while Bergen, Stavanger and Kristiansand have experienced a price reduction between 0 and 1.8 %. According to ECON Nye Boliger as of August 2017, the average price for new dwellings in Norway is NOK 51,400 per m² (6 % higher than at the beginning of the year). Oslo have the highest prices of NOK 79,500 per m², Stavanger is at NOK 57,300 per m², while Bergen, Trondheim and Tromsø have average prices between NOK 53,000 57,000 per m². According to Real Estate Norway, 59,051 homes have been sold in Norway so far in 2017, which is slightly fewer than the same period last year. It is also 4 % fewer than in Apartment units accounted for 56 % of the sales volume. In August, 8,631 units were sold, 8 % fewer than August When it comes to new homes, however, the sales volume for the two month-period ending August is 36 % lower than for the same period last year, and is now back to the level two years ago. For Oslo, the sales volume is 58 % lower than the same period last year was, however, a year of extraordinary high new home sales volume. The key policy rate has been unchanged since March 2016 and is still 0.5 %. It is expected to remain at 0.5 % until 2019, and this strongly contributes to the upward pressure on the residential prices. The banks tightened credit policies and more stringent capital requirements have however dampened the price growth. Residential construction The residential construction figures are rising to high levels in a historical perspective. The number of residential units under construction increased by 14.8 % during 2016, and the growth has continued into So far this year, residential units under construction has increased by 7.4 %. The volume of completed residential units has remained relatively stable over the last four years, at around 30,000 units per year, but is set to rise by % over the coming year.

61 The Residential Market Residential Prices Nominal values Average sales price, NOK/m 2 % annual price change 45 % 40 % 35 % % Residential prices increased by an annual 3,1 % from August 2016 to August % 20 % % % % 0 0 % % % Year-on-year change, by month, % Average residential price NOK/m² Sources: Econ Pöyry Finn.no Norwegian Assosiation of Real Estate Agents (NEF) 55 Residential Construction in Norway Volume of residential units Units under contstruction increased by 4.7 % and completed dwellings increased by 4.5 % during the first half of Jan 04 Jul 04 Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jul 13 Jan 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17 Residential units under construction Completed residential units, last 12 months Statistics Norway

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