Investors benefit from stable economic climate and real rental growth

According to the report 'Netherlands Market in Minutes - January 2018' published today by international real estate advisor Savills, the sustainable growth of the Dutch economy will continue throughout 2018, therefore the Netherlands will remain an interesting destination for (foreign) capital.

Looking back
After three consecutive years of record-breaking investment volumes, 2017 continued this trend. The 2017 total investment volume reached € 20.9 bn compared to € 16.8 bn in 2016, a growth of 24%, whereof 60% cross-border investments. Interestingly, all major commercial real estate sectors have shown a growth of at least 20%. This diversification is caused by investors looking for new investment opportunities with the best return.

• Office market 37% of total investment volume, 21% growth compared to 2016
• Retail market 21% of total investment volume,  104% growth compared to 2016
• Industrial market 13% of total investment volume, 43% growth compared to 2016
• Residential market 18% of total investment volume, -23% decrease compared to 2016
• Hotel investment 11% of total investment volume, 200% growth compared to 2016

Looking forward
Investors searching for interesting investment opportunities in the Netherlands are advised to broaden their horizon geographically and across sectors, giving them access to a wider range of product.

As Amsterdam yields are expected to bottom out and interest in other Dutch cities is growing, Savills expects the yield gap between Amsterdam and other large cities like Rotterdam, The Hague, Utrecht, Eindhoven and Den Bosch, will to narrow in 2018.

The office sector is recovering from the high vacancy rates as the vacancy is approaching a healthy level which is similar to pre-crisis rates. Savills expects the vacancy rate to further decline due to positive stimulation of office transformations and an increasing demand for office space in 2018. This will also result in a further increase of office rent prices.

Wouter Stevens, head of Agency at Savills Netherlands: “The lack of office supply had already led to lower incentives, but is now also leading to a 10% increase of average rent prices in the large cities. Investors benefit from real rental growth, while occupiers find themselves in the dilemma between a lack of high quality office supply on the one hand, and increasing rents on the other hand. As a result they deviate to secondary locations or come to a standstill, which will show in the take-up numbers.”

In 2017, foreign investors started to show interest for logistics and ‘branded living’ residential concepts and this trend is expected to continue in 2018. Savills forecasts yields to contract below 5% in these asset classes. The hotel market saw a huge investment volume growth in 2017.

Bas Wilberts, Head of Alternative Investment at Savills Netherlands: “Since investors widen their scope in the search for yield, hotels offer interesting opportunities. As this is a niche market with limited product, it will be a challenge to match this investment volume in 2018, however investor appetite will remain high.”

In sum, a positive outlook for Dutch commercial real estate in 2018, which is nothing new – but good news nonetheless.

Read the full research report Netherlands Market in Minutes – January 2018.