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Little room for new retail in Norwegian capital

Shopping for space in Oslo? Expect a chilly reception, because the combination of Norway's healthy economy, a temporary stall in construction and an influx of foreign retailers has just about tapped out that market.

On Karl Johans Gate and Bogstadveien, Oslo's two main shopping streets, there are zero vacancies, says Tore Christian Dahl a partner at Oslo-based Mork & Partners, an associate company of Cushman & Wakefield Healey & Baker. “In-town shopping centers are 100 percent full.”

In the suburbs the story is essentially the same. “In smaller malls outside the city center, there might be some vacancy, but not much,” said Ragner Eggen, an analyst at Oslo-based real estate firm Akershus Eiendom. (In Norway a mall is any shopping center measuring at least 27,000 square feet and containing a minimum of five stores.)

This appears about to change, though, because more retail centers are under construction, says Eggen. “Our estimate for retail space construction stands at 1.8 million square feet between summer 2007 and the end of 2009,” Eggen said.

The national government contributed to this tight retail real estate market with restrictions on shopping center development because of concerns about automobile-related air pollution. “In the past two years, the government loosened up, and construction of shopping centers has been increasing,” said Eggen.

Foreign retailers, mostly from elsewhere in Europe, have been moving into the city in a big way. Domestic and Swedish retailers drive the market, says Dahl, but “there is evidence to suggest the number of international retailers seeking representation in the local market is increasing.” For the past couple of years, the big news in Oslo retail has been the invasion of the Spanish chains. Mango arrived five years ago and has two stores in Oslo and a third in Stavanger.

The chain is now in the process of relocating its stores, though, says Dahl. “They are going from bad locations to good locations — to a Karl Johans Gate corner and a location on Bogstadveien,” Dahl said. At those streets Mango will be joining the other big Spanish retailer, Zara, which opened a store on Bogstadveien in 2006 and is preparing to open one on Karl Johans Gate. Among the other foreign retailers that entered the market over the past two years are Swedish clothier Gina Tricot, Swedish shoe store Bekväma Skor, Danish interior design store Illums Bolighus and British clothier Karen Millen. U.S. fitness club Curves joins U.S. restaurant chains Burger King and T.G.I. Friday's. Sweden's Ikea and Germany's Bauhaus furniture store are doing business in the Oslo suburbs.

— Steve Bergsman

High rents squeeze tenants on Karl Johans Gate

Oslo's priciest shopping space is on Karl Johans Gate, where a square meter (about 11 square feet) rents for $2,800 per year. City mall space rents for about $860 per square meter, says Bjorn Erik Nilsen, an analyst at Akershus Eiendom. “Rents for shopping malls are likely to rise faster, at least until the end of 2008,” said Nilsen. “After that, the volume of new space should cause rents to level.” As for Karl Johans Gate and some parts of Bogstadveien, rent levels are on the verge of peaking, he says, as margins are squeezed to the maximum of what is economically feasible for shop owners.