Commercial Leasing
Commercial leasing is the letting of premises for business purposes: offices, shops, warehouses, hotels, workshops, restaurants. The agreements fall under the Norwegian Tenancy Act (husleieloven), including chapter 5 on the duties of the parties during the lease term, where the Act uses the term "premises" as opposed to "dwelling". The difference from residential leasing is large: commercial leases are generally marked by freedom of contract, where the parties can depart from most of the Act's provisions by agreement, see husleieloven section 1-2.
The most important effect of this freedom of contract is that there is no rent control in Norwegian commercial leasing. The rent is set through negotiation and by the market, and is typically indexed 100% to the consumer price index at each annual adjustment. Standard variants include fixed rent, turnover rent (widespread in the anchor tenant segment and in shopping centres, where the landlord takes a share of the tenant's upside) and combined models with a base rent plus a percentage above a threshold. Negotiating strength is usually greatest for professional tenants that occupy a large part of a building, while small tenants often sign on the landlord's standard terms.
Lease lengths vary considerably by segment. Office leases in Norway have historically run 5 to 7 years for typical tenants and 9 to 12 years for larger anchor tenants; logistics and industrial leases are often 10 to 15 years, frequently as bare-house or triple net agreements where the tenant takes over operation and maintenance. Weighted across a portfolio, this gives the WAULT figure, a central metric in valuation. Short leases increase reletting risk and add a premium to the capitalisation rate.
Key negotiation points in a commercial lease go beyond the rent itself: who covers operation, maintenance, property tax, insurance and common areas (operating cost recovery, or "service charges"); who pays for fit-out on moving in (tenant improvements); the tenant's right to sublet and to assign; options to extend and expand; termination and break clauses; requirements for restoring the premises on vacating. The market standard is Norsk Eiendom's standard commercial lease, used with amendments by most professional players.
Commercial leasing also differs from residential leasing on security: a deposit or bank guarantee equal to 3 to 6 months' rent is the norm, but the level is negotiated. Breach is as a general rule governed by husleieloven section 9-9, which gives the landlord the right to terminate the agreement on material breach, but practice requires notice and observance of limitation periods. A tenant's bankruptcy gives the landlord a claim in the bankruptcy estate for outstanding rent, but rarely full recovery; professional landlords therefore require solid security up front.
The tax treatment of commercial leasing is also distinct: rental income is taxable as business income, while the landlord can deduct operation, maintenance and depreciation on the building. Within commercial property held in a company, rental income is often the main income stream and forms the basis for NOI, yield and the banks' loan terms.
In Placepoint you can examine a property in the property panel and see which businesses are registered in the building under tenants, so that you have a starting point for analysing the spread of leases and the tenant profile in a commercial building before you move on to the contracts themselves.
How it looks in Placepoint
In Placepoint you find this in Property panel:
From Placepoint's glossary: Commercial Leasing
More information: Lovdata: Husleieloven chapter 5, Lovdata: Husleieloven, Eiendom Norge: Market reports
English: Commercial lease.
Frequently asked questions
What is commercial leasing?
The letting of premises for business purposes: offices, shops, warehouses, hotels and similar. The agreements are governed by husleieloven chapter 5 and are marked by wide freedom of contract between the parties.
Is there rent control in Norwegian commercial leasing?
No. The rent is set through negotiation and by the market, and is typically indexed 100% to the consumer price index at annual adjustments. Residential leasing has its own rules on regulation, but commercial leasing does not.
How long are typical leases?
Office leases are often 5 to 7 years for typical tenants and 9 to 12 years for anchor tenants. Logistics and industrial property often have 10 to 15 year leases, frequently as bare-house or triple net agreements.
What security does the tenant provide?
A deposit or bank guarantee equal to 3 to 6 months' rent is the norm, but the level is negotiated. Professional landlords often also require security for the full cost of clearing and restoring the premises should the tenant move out.