Can Bjørvika Challenge the CBD in Oslo?

2015-10-14

Bjørvika is growing slowly but surely into a new major office hub in the area around Oslo Central Station. Many attractive tenants have moved in beside established and future cultural institutions such as the Oslo Opera House, Munch Museum and Oslo Public Library. Is Bjørvika in the process of becoming a genuine challenger to the CBD as Norway’s most attractive office area?

The CBD in Oslo has traditionally been defined as the area around Vika, Oslo City Hall (Rådhuset), Aker Brygge and Tjuvholmen. The last five years a new area in Oslo waterfront is growing up challenging the traditional prime office area’s status. In Bjørvika there are many newer buildings where several large Norwegian and international tenants are located. The area has Norway’s best public transport coverage, but also low parking coverage. In addition, a mix of commercial, residential and cultural areas is being developed, which is an excellent foundation on which to create a thriving district. However, a great deal remains to be done before the area can be said to function well at street level. Access to retail, food and beverage and other services is still limited. To some extent, the traffic through Bjørvika will also influence how this will develop in the long term.

The CBD generally consists of slightly older buildings, however the landlords in the area are continually taking steps to upgrade their buildings to top modern standards. For example, Norwegian Property is in the process of completing a large-scale upgrade of Aker Brygge. The tenants in the CBD typically belong to industries such as finance, property, law and shipping. Nationaltheatret is almost an equally good public transport hub as Oslo S, and there is also somewhat better parking coverage at Aker Brygge and Tjuvholmen than at Bjørvika. The area is well-established with excellent access to retail, food and beverage and other services in pleasant surroundings.

Source: Arealstatistikk

The graph above illustrates the rent per square metre for different property standards in Bjørvika and the CBD, and is based on observations of actual existing lease agreements. When concerning the very best premises, the difference between the two areas is almost NOK 1,300 (EUR 140,25) per square metre.

It is worth noting that the price difference falls rather significantly if one looks at lower standard premises and less attractive micro-locations within the areas. Our interpretation is that top premises in the CBD are in shortest supply (demand outweighs supply). Some tenants are willing to pay a relatively large premium for these premises. However, when the product becomes less unique, tenants will be less willing to pay top prices, and the price difference will be reduced significantly.

It is our conclusion that the tenants in the CBD value and are willing to pay for a broad selection of services within pleasant surroundings. In addition, it is important for many tenants that the area is acknowledged as being the most attractive in the city. Our experience is that the public transport coverage in Bjørvika and the CBD is generally considered to be equally good. That means that the other factors will be the crucial ones, and there is nothing that indicates that Bjørvika will outperform the CBD when concerning these types of features. Therefore, we believe that the area from Nationaltheatret and including Aker Brygge and Tjuvholmen will also achieve the highest rents in the future.