Real estate investment volume Q3 2023 down compared to Q3 2022

Savills’ latest report reveals the Dutch real estate investment market has experienced a significant decline in transaction activity in 2023, but there are some signals for optimism.

"Market in Minutes - The Netherlands - Autumn 2023: Investor Sentiment and the Search for Stability", reports that although investment volumes in Q3 2023 were up by 9.9% compared to Q2 2023, there was a 54.1% drop compared to the same quarter in 2022. Moreover, capital values have fallen by an average of 13.3% since Q2 2022. The office and residential markets have been particularly affected, while prime gross initial yields (GIYs) have increased across most sectors. The increase in investors' cost of capital and a weaker occupier market have had a substantial impact on transaction activity.

"The challenges facing the Dutch real estate market are undeniable. The gap between buyers’ and sellers’ price expectations remains significant. The landscape for real estate investors is tough because of the unprecedented speed in the increase of (re)financing costs. This is especially evident in the declining capital values of office and residential properties. Investors have been re-evaluating their strategies and are focusing more on smaller deal sizes" says Clive Pritchard, Head of Country at Savills in the Netherlands.

The report examines how weaker occupier foundations have contributed to a decline in investment volumes, especially in the retail sector. Bankruptcies have been on the rise in the Dutch economy, particularly in the retail sector. However, the industrial and logistics sector has maintained its stability and attractiveness to investors.

"The impact of occupier fundamentals cannot be underestimated. The industrial and logistics sector's strong performance stands in stark contrast to the challenges faced by other occupier sectors, making it a beacon of opportunity in the current market," Niek Poppelaars, Co-Head Logistics & Industrial, observes.

Investor Sentiment

The report delves into the extreme negativity in investor sentiment since Q2 2022, reaching its lowest point in March 2023. However, it also identifies a recovery with investors showing renewed interest in the Dutch real estate market. Savills Europe and the Middle East Investor Sentiment Survey further supports this positive shift in investor sentiment.

"Investor sentiment, though severely affected by recent economic uncertainties, is showing signs of recovery. Investors are increasingly open to adopting a more aggressive investment strategy, reflecting a newfound optimism in the market. Investors view the Netherlands as the 5th most favourable EME country to invest in, behind the UK, Germany, France, and Spain. This confirms the position of the Netherlands as one of the most important real estate markets in Europe and the Middle East." explains Mike Barnes in the European Research team.

Outlook

Savills anticipates a slow but steady recovery in Dutch real estate investment activity in the coming 12 months, dependent upon macroeconomic stability. The report underlines the importance of stability in worldwide capital markets for the recovery in commercial real estate.

"Stability is the key to recovery in the Dutch real estate market. As macroeconomic conditions stabilise, investor activity is expected to regain momentum. The recent challenges have reshaped the market, emphasising the need for resilience and adaptability," concludes Clive Pritchard, Head of Country at Savills in the Netherlands.

The quarterly "Market in Minutes – The Netherlands - Autumn 2023" report provides a comprehensive overview of the current state of the Dutch real estate investment market and offers valuable insights for investors, stakeholders, and industry professionals. For more information and to access the full report, please visit our website at link.