Strong return for Norwegian real estate in 2015

The capital return was 5.4 percent, which is the highest level since before the financial crisis. The return was driven by an average yield compression of 44 bps in 2015. Offices in the Oslo CBD delivered the best return at 16.5 percent, despite a marginal decrease in market rents and an increase in office vacancy. The country-wide office sector returned 11 percent, with Stavanger offices posting a negative capital return triggered by the decline in the oil price.

The income return is currently at historic lows in Norway, which is largely due to the compression in yields. But at the same time the spread versus the 10-year bond yield has never been wider.

The overall performance of the Norwegian index beat the 2014 return of 8.8 percent, and outperformed the five-year average of 7,5percent by a wide margin.

The index encompasses properties with an estimated value of NOK 117 bn (EUR 12.5 bn) with a total lettable area of 4.4 million square meters.