Bergen

Key figures

Q4 2021

Investors have both the willingness and capital to buy more commercial property in the Bergen market. After a record-high level of activity at the start of the year, everything suggests that Bergen will have the most active year ever in the transaction market. read more

Head of the Bergen office, Haakon Jard Veidung, talks about the high level of activity in the transaction market at the start of the year. After a long period during which much capital was channelled towards low-risk property, we are now seeing more available objects and a more normalised risk appetite on the part of investors. This is particularly evident in the level of interest in hotel properties.

In the office rental market, we’ve only seen minor effects from the pandemic so far. The office vacancy rate shows only a marginal rise from what we saw before the pandemic, while rental prices in the first half have risen further, particularly in the market for the best properties.

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Offices with a high standard, best location, 7 years weighted remaining rental period, market rent and secure tenants.

Prime Yield

4.25
0.5

We assume a seven-year weighted remaining lease period, and therefore estimate that longer leases can be traded even lower.

Offices with ordinary standard, located in one of the office clusters outside the city center, 4-5 years weighted remaining rental period, market rent and ordinary companies as tenants.

Secondary yield

6.25
0.25

Normal yield is meant to reflect an average office property. We have defined it to be an office property with 4–5 years left of the lease contract, an OK location.

Number of transactions> NOK 50 million

Transactions in 2022

(Accumulated)
19

The number of transactions indicates the number of transactions with a minimum value of NOK 50 million in Bergen.

Annual transaction volume measured in NOK billion.

Transaction volume

(B NOK)
3.6

The transaction volume indicates the total property value of the transactions made, with a minimum value of NOK 50 million.

Office space offered in the market and available within 12 months.

Vacancy

(per cent)
8.2
0

There is little discernible coronavirus-related impact on office vacancy in Bergen. Office vacancy rates are only marginally up, and roughly at the historical average level.

Office rental market

Q4 2021

The pandemic has also had little effect on the office rental market in Bergen. The office vacancy rate has risen slightly to 8.2 per cent (2020: 7.6 per cent), the number of contracts that have been signed has been more or less normal in the first half of 2021, and office rental prices rose in the first half. read more

 

Increased supply gives slightly rising office vacancy rates

The office vacancy rate in Bergen has risen slightly to 8.2 per cent (2020: 7.6 per cent), which is close to the city’s historical average. However, there are large local variations between the various office clusters, but the vacancy rate has increased for 4 out of 8 office clusters since the last report.  The lowest office vacancy rate of all is in Bergen city centre, where it is now just 5.4 per cent. In the city centre, we have registered only 4 available options over 2 000 square metres, which illustrates the attractiveness of the downtown location for tenants. At the other end of the spectrum, we see that there are significantly higher vacancy rates in areas such as the area south of Bergen (Bergen Sør, 13.0 per cent) and Fyllingsdalen (13.5 per cent), which over time have struggled with a lot of vacant premises. Bergen Sør alone accounts for well over 40 per cent of all available office space in the Bergen region.

While office vacancy rates in Bergen have been helped considerably by low rates of new construction, we expect this to change now.  Our forecast indicates that the office vacancy rate will rise slightly from the current level of 8.2 per cent to 9 per cent during the course of a three-year period, mainly due to increased construction of new offices.  In the period 2021–2023, we’re expecting 10 new office buildings to be constructed in Bergen, totalling 75 000 square metres, which is slightly above what we expect Bergen will be able to manage to absorb in the same period. DNB Markets

However, Bergen investors are not very concerned that increased use of home office solutions will dampen the demand for offices. Our latest investor survey among Bergen investors shows that none of the investors have yet experienced tenants having a reduced need for office space, although it’s still too early to draw conclusions on this.

 

The optimism is back

Figures from the statistics agency Arealstatistikk show that rental prices in Bergen have risen 4 per cent in the first half of 2021 to NOK 2 010 per square metre. However, the increase is greatest in the ‘A’ category (the 15 per cent most expensive lease agreements), where the average price has now risen 8 per cent to NOK 3 000 per square metre.  This confirms our impression that there is great willingness to pay for the very best office space, particularly in Bergen city centre. In the first half of 2021 alone, 10 lease agreements (totalling over 17 000 square metres) signed at levels above NOK 2 500 per square metre have been registered.

According to the statistics agency Arealstatistikk, 63 lease agreements have been signed in Bergen for close to 54 000 square metres in total, indicating that activity levels have picked up well during the second quarter. We are experiencing that, to a greater extent than previously in the pandemic, tenants are managing to plan their future need for office space, and this is reflected in the level of activity.

Optimism is also increasing among investors.  Figures from our latest investor survey in Bergen show that the proportion of investors who now believe in rental price growth is back to the pre-pandemic level. Over 60 per cent of investors expect office rental prices in Bergen to rise in the coming 12 months, and they expect prices in downtown Bergen to rise somewhat more than in the rest of the market. We largely agree, and we expect a rental price growth in Bergen city centre of 10 per cent over the coming three years, which is slightly above the KPI growth in the same period. Some of the factors that we believe to be contributing to increased pressure are the great demand for downtown premises among the tenants, the low vacancy rate and the low level of new office construction.

 

Click headings to sort table
Click the rows for more information about the area
AreasSorter High standardSorter Office vacancySorter
Fyllingsdalen 1500 - 1900 12.5 %
Bergen Sør 1300 - 1850 11.6 %
Næringskorridoren 1500 - 2100 8.6 %
Sentrum 1900 - 2800 7.4 %
Sandviken 1400 - 1700 5.6 %
Åsane / Bergen Nord 1400 - 1700 4.1 %
Laksevåg 1500 - 1800 5.1 %

Rental prices
Top rent
High standard -
Office vacancy pr. %
Construction ()

Transaction market

Q4 2021

Interest in properties in Bergen is record high, and everything suggests that 2021 will probably be the most active year ever in Bergen. Our fresh investor surveys (both locally and nationally) confirm that there is a high level of buyer interest in Bergen properties. They also indicate that this interest will continue in the time ahead. Bergen is once again being highlighted as the city that national investors would most like to invest in outside Oslo, which confirms Bergen’s strong position in investors’ pursuit of new objects. read more

At the same time, investors report that there are more available objects on the market and a better market balance, which also makes more new transactions possible. Furthermore, we see that the risk appetite is starting to normalise as society reopens, in great contrast to last year, when a large proportion of the available capital was channelled towards low-risk properties. So far this year, we have seen markedly increased interest and a higher number of completed transactions for the segments hardest hit during the pandemic, namely hotels and the retail trade segment. So far in 2021 we have already seen 6 completed hotel transactions, as it has now been possible to complete several processes that started last year. Within the retail trade segment, there is still a highly selective market. There is a lot of interest in big box, groceries and local shopping centres, but few transactions have been made in downtown retail trade, for example.

DNB Næringsmegling currently estimates that the prime yield for office property in Bergen is 3.75 per cent. Like investors, we believe the lowest point has been reached in terms of yield, but at the same time that there are good reasons to indicate it will stay low in the short term, although there is great uncertainty relating to further interest rate developments in the time ahead. First of all, there is a large demand surplus for office property in Bergen, particularly for prime office property. Furthermore, a low office vacancy rate in the city centre and expectations of further rental price growth will help to maintain this interest going forward. That said, it should be noted that Bergen has had the largest yield decline of all of Norway’s four major cities in recent years, and that the difference compared with Oslo, for example, has now been assessed to be a record low 50 basis points (historical average 80 basis points).

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