Norway

Norway
As the most north-westerly country in Europe, although not a European Union (EU) member, Norway shares the Scandinavian peninsula with Sweden.  The country also shares borders with Finland and Russia.  Norway is one of the larger countries in Europe in terms of land area, but it has a very low population density and a population of only 5 million.  Over three-quarters of the country are mountainous and a third of its territory is north of the Arctic Circle.  Almost half of the population lives in the southern part of the country where the cities of Oslo, Bergen and Stavanger are located.  

Norway is still different from other countries in Europe, in that its economy remains relatively strong. It is one of the wealthiest countries in the world, in part due to substantial offshore oil and gas reserves.

Norwegians are very quality conscious and tend to prefer quality goods and services to discounted brands. In common with other Scandinavian countries they are very design conscious, a factor that is evident in the retail market.  Norwegians’ strong purchasing power is attractive for local and foreign retailers alike.

Increasing number of international retailers are looking at the prosperous Norwegian market and are particularly focused on the high streets. Oslo and the other major cities are the key cities, though Oslo is the clear locomotive. Demand for prime space remains healthy, with strong interest from domestic and international retailers alike.

ECONOMIC SUMMARY
ECONOMIC INDICATORS*2009201020112012F2013F
GDP growth -1.60.61.53.32.8
Consumer spending -0.23.62.43.23.3
Manufacturing production -3.6-5.5-4.21.41.7
Investment -7.5-5.26.35.55.1
Unemployment rate (%) 3.23.63.33.23.1
Inflation 2.22.41.31.11.7
NOK/€ (average)8.738.017.797.667.94
NOK/US$ (average)6.296.055.606.056.20
Interest rates 3-month (%) 2.52.52.92.22.5
Interest rates 10-year (%) 4.03.53.12.32.7

NOTE: *annual % growth rate unless otherwise indicated. E estimate F forecast
Source: Oxford Economics Ltd. and Consensus Economics Inc

ECONOMIC BREAKDOWN
Population 5.0 million (2012)
GDPUS$ 484.2 billion (2011)
Public sector balance 14.7% of GDP (2011)
Parliament Coalition: Labour Party, the Socialist Left Party and the Centre Party
Head of State King Harald
Prime Minister Jens Stoltenberg
Election datesSeptember 2013 (Parliamentary)
RETAIL SALES GROWTH:
% CHANGE ON PREVIOUS YEAR
2009201020112012F2013F
Retail Volume0.69%1.48%2.23%2.52%2.11%
Retail Value2.42%2.19%2.87%3.19%4.32%

Source: Oxford Economics Ltd.

LARGEST CITIES (2011)
CITYPOPULATION
Oslo590,041
Bergen252,051
Trondheim165,191
Stavanger119,586
Sandvika108,144

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Oslo: 59.913869, 10.752245
Bergen: 60.391263, 5.322054
Trondheim: 63.430515, 10.395053
Stavanger: 58.969976, 5.733107
Sandvika: 59.890905, 10.527787

MAJOR DOMESTIC FOOD RETAILERS

Norgesgruppen, Reitan Gruppen, Coop Norge, Vinmonopolet

MAJOR INTERNATIONAL FOOD RETAILERS

ICA, Spar

MAJOR DOMESTIC non-FOOD RETAILERS

Varner Gruppen, Moods of Norway

INTERNATIONAL RETAILERS in norway

H&M, Bestseller, Inditex, KappAhl, Lindex, Gina Tricot, Nilson Group, Elkjøp, Ikea, Clas Ohlson, Celesio, Monsoon/ Accessorize, Aldo,

Food & Beverage Operators

McDonalds, Burger King, United Bakeries, Kaffebrenneriet, Bagel&Juice, Wayne’s Coffee, 7-Eeleven, Deli De Luca, Narvesen

TYPICAL HOURS
MONDAY - FRIDAYSATURDAYSUNDAY
09.00-18.00
Late night showing on Thursday and on first Saturday of each month.
09.00-15.00Generally not permitted

Norway is a well developed retail market, though until recently penetration by foreign retailers has been relatively minimal, largely because of the country’s geographical position, dispersed population, small market size and the fact that it is not a member of the EU. Only Oslo and a few other urban areas are large enough to attract international retailers, although demand from foreign retailers is increasing.  There are not surprisingly a number of retailers originating in its Scandinavian neighbours.  They benefit from brand familiarity and market similarities are perceived as non-intrusive market entrants. There are however many strong domestic retail companies.

Food retailing is highly concentrated in the hands of a few companies.  As in Sweden and Finland, the retail distribution of wines and spirits goes through a state monopoly called Vinmonopolet.

Historically shopping centers have been the strongest retail markets. Total existing stock of shopping center (over 5,000sq.m) space in Norway totaled around 3.6million sq.m GLA as at 1 January 2012. Norway has a high provision of space in shopping centres per ‘000 population.  Shopping centres have traditionally been meeting places.  The top five players control some 80% of the market.  The top ten centres in Norway all have turnovers of above NOK1 billion.

Norway has slowly been increasing and developing its retail market in recent years. More and more international retailers are considering to enter the Norwegian market, and there has been an increase in international retailers within luxury products, mass market concepts and restaurants/cafés. Retail spaces are also becoming increasingly available as new shopping centers are in development in many cities of the country, in particular in Oslo where there are three big retail schemes in development.

The Norwegian factory outlet market is in its infancy.  Norwegian Outlet, Vestby was the first one and more retailers are now focusing on this segment of the market. Outlet One (also in Vestby) is perhaps Norwegian Outlet’s strongest competitor. Other retailers have established their own direct outlet stores.

There has also been an increasing level of e-commerce in Norway, as its inhabitants are modern and up-to-date. Many retailers have online purchasing opportunities, and the market for online shops are continuously developing. But the e-commerce scene is still a little inmature in Norway among the Norwegian retailers.

It is possible to enter the Norwegian retail market direct, though many also franchise and enter via concessions/shop-in-shops.

There are no restrictions on foreign companies either buying or renting property in Norway.  Normal lease length in Norway is 10 years without rent reviews, but in some cases you might be able to get a 3 or a 5 years lease.  Rent is regulated by the increase in the CPI.

Although it is possible to occupy a new building within a few weeks, it is more realistic to expect that on average it will take 8-12 months from initializing the property search to taking occupation of an existing property. For the best locations in Karl Johans gate it can take years.  This includes time for considering location options, the identification of buildings or sites, negotiating leasehold or freehold terms and drafting of the appropriate legal documentation.

New Entrants to the Market

GucciScotch & SodaNew YorkerStarbucks

KEY FEATURES OF LEASE
ITEMCOMMENT
Lease Terms3-10 years is typical. Quoted in NOK per year on a square metre basis. Break options negotiable. No restrictive user clauses.
Rental PaymentMonthly / Quarterly (latter most common). In retail leases the rent is sometimes linked to the lessee's turnover. Rent deposit 6-12 months, or a bank guaranty (on demand). Premium/key money is rarely paid. In shopping centres rents are mainly turnover-based, with a minimum fixed rent.
Rent ReviewAnnual indexation to Consumer Price Index (usually with minimum level). There is a statutory right to renew.
Service Charges, Repairs and Insurance Landlord is responsible for external repairs and building insurance. Tenant for internal repairs. Service charges are not included in the rent, they are added on. Whether or not utilities are included varies from property to property, but normally you need your own electricity subscription as a minimum.
Property Taxes and other costs Property tax “kommunale avgifter” is charged directly to the landlord by the authorities. Most leases allow for the recuperation of the amount from the tenant. VAT 25%, voluntary
Disposal of a LeaseAssignment/Sub-letting - normally yes (subject to landlord approval). Early termination only by break clause. Tenant’s Building Reinstatement Responsibilities at lease end original condition, allowing for wear & tear, as per contract.
Valuation MethodsFloor space is measured on a ‘gross internal area’ basis + a percentage of the common area (varies between 10-25%).
LegislationFloor space is measured on a ‘gross internal area’ basis + a percentage of the common area (varies between 10-25%).