Norges Bank

Staff Memo

What drives office rents?

Christian Bjørland and Marius Hagen
Staff Memo


Banks have substantial exposures to commercial real estate (CRE). Rental prices are important for CRE companies’ debt-service capacity, which in turn affects the risk of future bank losses. In this paper, we estimate error correction models (ECMs) to determine the main drivers of office rents in Oslo and to detect deviations in rents from their estimated long-run equilibrium. We find that employment and stock of offices are important explanatory variables. Moreover, our results show that rents
have followed their estimated equilibrium closely and have re-adjusted quickly in periods of deviation.

Staff Memos present reports and documentation written by staff members and affiliates of Norges Bank, the central bank of Norway. Views and conclusions expressed in Staff Memos should not be taken to represent the views of Norges Bank.

ISSN 1504-2596 (online)

Published 19 December 2019 10:00
Published 19 December 2019 10:00