NORWAY -Norwegian commercial property returns fell into negative territory in 2008 after delivering 15% plus returns for three consecutive years, according to the IPD Norway Annual Property Index.

Total returns from commercial property fell to -4.7% last year, dragged down mostly by a 12.5% drop in office capital values, and were lower than those of neighbours Sweden and Denmark, which returned -3.3% and 3.1% respectively. 

"The capital values dropped by 9.9% in Norway 2008, which was a bit more than in the other Nordic countries, but much milder than those experienced in the UK and Ireland," said Håvard Bjorå, Norway country manager for IPD Norden.

Norway's property market did outperform the equity market last year as the Oslo Benchmark (OSEBX) Index returned -54.1%, though it lagged behind the bonds market, which returned 10.5% as measured by the Oslo five-year Stat Index (ST5X).

Capital values for the industrial sector fell by 7.4%, while the retail sector's dropped by 5.6%. The falls in capital values were reflected in the sectors' total returns, with offices, industrials and retail properties returning -7.4%, -1.7% and 0.3% respectively.

"Yields have now - after five years of compression - started to rise across all property sectors in Norway. The yield shift alone would have cut the values by 15% but this was partially counterbalanced by a robust rental growth in the retail sector," said Bjorå.

Norway experienced robust income growth across all sectors, with an All-Property return of 5.7%. 

Over three years, property still outperforms equities and bonds, returning 9.8% compared to equities, at -12.1%, and bonds, at 4.5%.

The IPD Norwegian Annual Property Index is based on figures from 459 properties in 12 funds covering NOK 82.7bn (€9.5bn).

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