Given current real estate investment volumes in the Netherlands, what needs to happen for the market to pick up?

1. By how much will pricing still have to adjust?

It really depends on the type of product. In general we have seen a shift in yields of 150-175 bps since Q1 2022. For the moment, this seems almost sufficient for core investment product and we do not expect to see pricing adjust by a lot more, with some caution due to potential interest rate hikes that may still occur, maybe by another 25-50 bps.

A bigger problem in terms of investment volumes is the increased risk adversity of investors. The definition of core has changed and is more narrow than in the past. As a result, product that was previously core is now seen as core plus, as we are dealing with increased debt and equity costs. In general core plus is less of a strategy for many investors at the moment as we are predominantly seeing demand for core or value add product.

2. When can we expect yields to settle?

That is the one million dollar question. General expectation is that we will see more activity after the summer. However this was already the expectation at the end of 2022 and honestly this momentum is being pushed out by some negative events during Q1 such as higher than expected inflation, further interest hikes, and failing banks including SVB, Credit Suisse and others. So my personal opinion is that it will be Q1 2024 when we will likely see stability in the global economy and capital markets.

3. Which property sectors yields are adjusting fastest?

The sectors with the best occupier fundamentals. In general that would be logistics, residential, life sciences, food anchored retail and healthcare.

However for the Netherlands the residential sector is under pressure due to adverse legislation and the life science and healthcare sector are relatively small markets to generate large investment volumes.