According to Savills latest ‘Market in Minutes – The Netherlands Q1 2019’, the buy signal for Dutch real estate remains strong. This is due to the robust Dutch economy with a triple-A status, increasing occupier demand for prime product, rising rents and real estate remaining a stable choice for investment managers as part of a mixed investment portfolio. Savills notes that the main reason for rising rents is the lack of new developments due to a restriction in municipal policies, a shortage of building plots and rising construction costs. If municipalities do not change their policy, rental growth will continue to be strong.
Development constraints Despite rising demand, municipalities remain quite restrictive when it comes to granting permits for new developments. For developers, such of restrictions increasingly result in unprofitable projects. In combination with rising land prices and rising construction costs, fewer new developments get off the ground.
Jordy Kleemans, Head of Research & Consultancy at Savills in the Netherlands, says: “Shortage of building plots not only applies to ‘obvious’ locations in or close to cities but also for example in the logistics hotspots, for which land is becoming scarce. In Venlo for example, suitable land for new logistics developments has already decreased by 57% in less than three years. A sector in which land availability has never been a problem before is now facing rental growth.”
Jan de Quay, Head of Investment at Savills in the Netherlands, adds: “We expect rental growth of between 3-5% per year in the Dutch real estate sector and consequently property value growth. This is positive for existing owners and, because of the expected rental growth, is a compelling argument for investors to buy, even at historically low yields. The fact that the number of new developments is limited strengthens the position of prime Dutch real estate even further.”
Savills notes that in order to prevent rising rents becoming an affordability issue for occupiers in the future, municipalities need to take action – specifically in prime locations – to restore the balance, for instance by freezing land prices. Amsterdam has already made the start by announcing it will loosen its office building restrictions.