Norwegian commercial property returned 4.7% last year according to the latest IPD Norway Annual Property Index. This is down from 7.3% in 2011, but as we all know in the post-crash era falling figures aren't bad if they are bringing things down to a stable and sustainable level as looks to be the case in Norway's commercial property scene.
The index shows that direct property outperformed bonds, which returned 4% (ST5X Oslo Stock Exchange) but came in well behind equities with 11.6% (MSCI Norway), IPD puts the solid performance down to increasing risk appetite.
According to the report income returns remained unchanged from 2011 at 5.8%, while capital return decreased to -1.0% from 1.5%. Norwegian GDP growth was 3.5%, which is below the 13 year average of 7.3%, although inflation was just 1.1% (HCPI).
The data also shows that all sectors are experiencing the same solid performance, with offices coming in with the biggest returns at 5%, retail not too far behind at 4.1% and industrial snapping at its heels with 4% The Index showed positive market rental increase of 4.1% for offices but a 1.5% decrease for retail. Furthermore, the Index showed a small increase in valuation yields across the board, averaging at 12bp, which has dampened the returns by nearly 2.0%.
Håvard Bjorå, IPD Director, Nordic Region, said, "Offices gained pole position ahead of the retail and industrial sectors in 2012. Historically retail returns have been the strongest, although the last few years have revealed a slowdown, which is further pronounced in 2012. Nevertheless, it is encouraging that market rental value growth for the important office sector improved in 2012, reflecting increased tenant demand.
"We have also noted that valuation yields for all segments have shifted upwards, although marginally. Offices in Stavanger show winning returns this year and for the last three years, but weakest returns are found in offices in the Oslo fringe, as well as offices outside main cities and in shopping centers."