MARKET UPDATE

Labour marketGDP: Mainland Norway vs. Eurozone

Number formatting: SI style (English version)

Latest figures – Norway

Latest transactions

Latest lease contractsSUPPLY* IN OFFICE CLUSTERS IN GREATER-OSLO

Asker

Billingstad

Sandvika

Majorstuen

Nydalen/Sandaker

Økern/Løren/Risløkka

Bryn/HelsfyrCBD

Bjørvika

Kvadraturen

Skøyen

Fornebu

LysakerInner city

0 - 5 %

5 - 10 %

10 - 15 %

> 15 %

*Advertised office space of the total office building mass in greater-Oslo. This includes potential advertised new projects.

Tenant Address Cluster Size (m²)

Helsedirektoratet(e-helse)

Verkstedveien 1 Skøyen ~ 7 600

Securitas Hasle Linje Økern ~ 7 000

Statens Legemiddelverk

Strømsveien 96 Bryn/Helsfyr 6 500

Skattedirektoratet Fredrik Selmers vei 4 Bryn/Helsfyr ~ 3 700

P.A. Consulting Verkstedveien 1 Skøyen ~ 1 250

Address/property Buyer SellerPrice

(NOK mill.)

Sektor Gruppen Citycon Several ~ 12 320

Aberdeen Norge II Portfolio

KLPAberdeen Eiendomsfond

~ 3 600

Statoil HQ Forus Colony Capital Statoil ~ 2 500

Citypassasjen KLP Berner Gruppen ~ 850

Munkedamsveien 62 DEKA Ragde Eiendom ~ 550

JULY 2015

• The central bank of Norway cut the interestrate by 25 basis points to record low 1 % inJune. The bank signaled another cut may comeas soon as September.

• The Norwegian PMI-index released 1 Julyshowed that the weakening of Norwegianindustry is accelerating. The overall indexended at 44.0 in June, the lowest noted sinceOctober 2009.

• In the estimates released 4 June, StatisticsNorway estimates that the mainland GDPgrowth will be 1.2 % in 2015, 2.4 % in 2016 and3.2 % in 2017.

• The latest numbers from the Norwegian Labourand Welfare Administration released 3 Julyshowed an increase in the unemployment rate(register based) from 2.7 % in June 2014 to2.8 % in June 2015. The strongest increase isseen in areas with high employment within Oil& Gas.

• 7 July Statistics Norway released latest numbersfor Norwegian industrial production whichshowed a 0.1 % decrease for the combinedresults of last three months (March - May)compared to the previous three months period

• The inflation rate is running close to the centralbank’s target of 2.5 %. In May, the CPI and theCPI-ATE were 2.1 % and 2.4 % respectively.

• Fueled by interest-rate decrease, housing priceskeep rising, and the latest numbers released 3July showed an increase of 0.1 % the last monthfor Norway. Financial Supervisory Authority hasnow implemented stricter guidelines forresidential mortgage lending practices.

Source: FINN.no/Malling & Co

SUNDTKVARTALETManpower has signed a lease agreement of 4 200 m² in the new project Sundtkvartalet starting early 2017. Malling & Co Næringsmegling advised Entra and Skanska in the letting process. This new office and retail building in central Oslo is currently being erected. 12 500 m² office space is occupied and approximately 17 000 m² is still available.

-6,00%

-4,00%

-2,00%

0,00%

2,00%

4,00%

6,00%

Mainland-Norway EurozoneSource: Statistic Norway/IMF

-2,0 %

-1,0 %

0,0 %

1,0 %

2,0 %

3,0 %

4,0 %

5,0 %

Unemployment rate Employment growth

Source: Statistics Norway

Commercial Real Estate

Transaction volume (>50 MNOK)Office rents in Oslo (NOK/m²/yr)

Topic of the month:

Eiendomshuset Malling & CoDronning Mauds gate 10, Postboks 1883 Vika, NO-0124 Oslo, NorwayT: +47 24 02 80 00 – E: post@malling.no – www.malling.no

Key facts real estate Advertised office volume in Oslo (m²)

0

10

20

30

40

50

60

70

80

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Registered Estimate

Office letting market• The office supply in the defined office clusters

was 12.2 % in June, while the vacancy rate(within 12 months) was 8.1 %. The averagesupply rate over the last 12 months is 11.9 %,while the average vacancy rate is 8.2 %.

• Office rents have fallen somewhat recently,according to Arealstatistikk’s register. Theaverage rent of lease contracts signed in Q22015 is approximately 5 % lower than in Q22014.

• The vacancy in the western fringe zone hasincreased significantly over the past months.An important reason for this is subletting.

• The number of tenants subletting parts of theirpremises is still increasing, especially in the oilrelated industry. Statoil is subletting up to8 000 m² of its office space at Fornebu. Weexpect the subletting to be an increasinglyimportant part of the supply ahead.

• The expected construction volume to befinalized in 2016 and 2017 is still low. The firstand most important reason for this is that fewlarge tenants are moving in the coming years.The second reason is the weaker economicoutlook that affects the labour market andtenant’s motivation to enter into a costlyrelocation process.

Transaction market• So far in 2015, we have registered a

transaction volume of more than 52 billion NOKdivided into 88 transactions. We expect thetotal transaction volume in 2015 to end around75 billion NOK. An even larger volume isconsidered highly plausible.

• 9 of the transactions are above 1 billion NOK,which is mostly due to several portfolio sales(e.g. Sektor Gruppen, Aberdeen Norge II, Bulkportfolio). We also see that the so-called “cash-flow” properties are attractive to investors (e.g.Statoil’s HQ in Stavanger/Forus).

• We estimate the prime office yield to be4.40 %. We have seen a few transactions below4.50 % the last months supporting a furtheryield decrease from 4.50 %

• The normal yield is estimated to be around6.25 %. It is noteworthy that the gap betweenprime and normal seems quite robust.

• The more pessimistic economic outlook has notyet dampened the desire for NorwegianComercial Real Estate. We believe that thestrong market will continue towards the end of2015, although banks seem to have become abit more restrictive on providing financing thelast few weeks.

Norway has matured to an international CRE-market

PER JUL. 2015 PER JUL. 2014

Prime yield* 4.40 % 5.00 %

Normal yield* 6.25 % 6.75 %

5 yr swap rate (per 8 July)**

1.63 % 2.09 %

Average of 15 % highest rents in Oslo*** (Q2)

3 220 NOK/m²/yr. 3 100 NOK/m²/yr.

Office contracts signed(Oslo)*** (Q2)

141 590 m² 109 750 m²

Largest office contract (Oslo)*** (Q2)

10 555 m² 11 984 m²

Avg. contract length (Oslo)*** (Q2)

5.0 yrs. 4.9 yrs.

OFFICE CLUSTERPER JUL. 2015

Prime / normal*PER JUL. 2014

Prime / normal*

CBD (Vika/Aker Brygge/Tjuvholmen)

4800 / 2800-3200 4700 / 2700-3300

Skøyen 3300 / 2100-2400 3300 / 2100-2400

Central Oslo 3500 / 2010-2500 3500 / 2000-2400

Bjørvika 3500 / 2700-3000 3500 / 2700-3000

Lysaker 2350 / 1800-2000 2350 / 1600-1800

Fornebu 2150 / 1500-1700 2150 / 1400-1600

Nydalen/Sandaker 2200 / 1500-1700 2300 / 1500-1700

Økern/Løren/Risløkka 2200 / 1000-1500 2100 / 1400-1600

Bryn/Helsfyr 2200 / 1550-1750 2100 / 1550-1750

Source: Malling & Co

*Source: Malling & Co **Source: Kommunalbanken ***Source: Arealstatistikk Q2 2015

Source: Malling & Co

Source: FINN.no/Malling & Co

*Definitions: Prime rents are consistently achievable headline rental figure that relates to a new, well located, high specification unit of a standard size commensurate demand within the predefined market area. The prime rent reflects the tone of the market at the top end, even if no new leases have been signed within the reporting period. One-off deals that do not represent the market are discarded. Normal rents should reflect the interval where most contracts are signed in the specified market area.

Definition: Normal yield is defined as the net yield of a well maintained building situated in the fringe zone with strong tenants on a 5 – 8 year contract.

Only a few years ago, we anticipated that the share of international investors would increase significantlyin the Norwegian CRE-market. Now, we can conclude that our predictions have become evident in thetransaction statistics. According to our latest counting from first half of 2015, the share of internationalinvestors have reached almost 50 %, and we know several deals with foreign investors are in pipeline forthe next quarter. We believe there are two main reasons for the increasing interest from foreigninvestors. Firstly, the Norwegian CRE-market has become more professionalized and open for foreigninvestors, and secondly, the European CRE-market in general has become very attractive for investors allover the world, and natural consequence is that parts of the money-wave also hits Norway. We believethat this trend is a permanent shift in the market, and that international investors will have a significantshare of the transaction market also in the future. So far, we have seen little interest from Asian-basedinvestors. We believe that an increasing number of Asian investors will invest in Norway in the future.

Bill

. NO

K

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

1 000 000

Q1

20

11

Q2

20

11

Q3

20

11

Q4

20

11

Q1

20

12

Q1

20

12

Q3

20

12

Q4

20

12

Q1

20

13

Q2

20

13

Q3

20

13

Q4

20

13

Q1

20

14

Q2

20

14

Q3

20

14

Q4

20

14

Q1

20

15

Q2

20

15

< 5 000 m² > 5 000 m²

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2011 2012 2013 2014 2015*

Source: Malling & Co*Per 3 July 2015

Transaction Volume, share of international investors (buy side only)