Rotterdam vacancy levels expected to drop due to planned conversions, Savills

According to the research report 'City Special Rotterdam offices' published today by international real estate advisor Savills, the city’s relatively late start of withdrawing old office stock has resulted in a high vacancy rate (15.1%). However, in the years to come more residential conversions will take place due to rising house prices. As the pipeline for new office buildings in Rotterdam is limited, Savills expects vacancy levels to drop significantly.

Rotterdam has a higher vacancy rate compared to the Dutch average (13.8%) and to other large cities such as Amsterdam (6.7%), The Hague (8.3%) and Utrecht (8.1%). This high vacancy rate can be partly explained by the relatively old stock. Around 34.2% of current stock is older than 40 years. In Amsterdam, The Hague and Utrecht, this percentage is much lower (21.5%, 29.3% and 19.1% respectively).The Grade A buildings show significantly better fundamentals compared to Rotterdam as a whole. Vacancy decreased to 8% in 2017, and both take-up and investment volume grew in recent years.

Jordy Kleemans, Head of Research & Consultancy at Savills, said: “Despite the relatively high vacancy rate, the investment market has been remarkably strong in Rotterdam. Compared to other large Dutch cities, Rotterdam has been able to attract comparable – or even more capital. This is mainly due to the attractive yield gap in Rotterdam. Prime yields currently stand at 5.0%.”

Jordy Diepeveen, Head of Acquisitions, Savills Investment team in the Netherlands, said: "At first sight, Rotterdam seems to lack strong fundamentals. However, investors are  interested in Rotterdam as a closer look reveals growth potential. The stable Grade A market in Rotterdam is very appealing to core investors, which is reflected in the latest investment deals – like Maastoren and Weena 455-457. In addition, value-add investors also see ample opportunities to benefit from the inevitable recovery of the Rotterdam market as a whole. With the current transaction pipeline, we expect this substantial volume of deals to continue throughout the course of 2018.”

Download the full report here.