Estimated total investment volume €17 billion
Real estate advisor Savills today published its last research report of 2021. This report looks back on an eventful year, in which confidence in the Dutch real estate market remained unchanged.
Occupier market
Confidence in the economy by entrepreneurs, combined with apositive economic outlook, ensured that the Dutch property market was more resilient than thought. This is reflected in the take-up volume.
In the logistics sector, for example, the total take-up in 2021 is already greater than the total take-up in 2020, and the year is not yet over. For industrial space as a whole, the take-up volume in 2021 will already be 80% of the total take-up volume achieved in 2020. The take-up level of industrial space is expected to be higher in 2021 than in 2020.
For offices, the leasing volume is showing greater dynamism than expected. It was predicted that the take-up volume of offices in 2021 would be low. With another quarter still to go, office leasing is already at 70% of the long-term average in Q3.
In the retail market too, the consequences of Covid-19 turned out not to be as severe as previously anticipated . Due to the limited number of bankruptcies, the expected increase in empty shop units failed to materialise too. In addition, the take-up of retail spaces did not decrease significantly either, with the take-up volume in 21Q3 already at 65% of the long-term average.
Investment market
The positive long-term prospects and the apparent resilience of the Dutch economy to additional Covid-19 waves are instilling confidence in those investing in Dutch property. In 21Q3, the investment market experienced a recovery compared to 21Q2, with over 50% more being invested in 21Q3 than in 21Q2. This is 18% higher than the long-term quarterly average. This recovery is mainly thanks to industry (30% of the total in Q3) and offices (40% of the total in Q3). The weighted estimate is that the investment volume for 2021 will end up at around 17 billion euros. A decrease of approximately 25% compared to last year, but above the long-term average.
Nearly 3 billion euros have been invested in logistics real estate so far in 2021, making it the largest sector for the first time in history. Prime locations are sought after. As a result, compression is taking place in the prime yields. For example, a transaction has already been concluded in logistics hotspot Venlo with a BAR of 3.25%. This continued interest in logistics hotspots is leading to a spill-over effect to secondary locations. The logistics sector will remain the main pillar of the investment market for the remainder of 2021.
In addition to logistics, offices accounted for a relatively large share of the total investment volume of 2021 YTD (30%). This relatively large share is partly due to the transaction of the High Tech Campus Eindhoven, which changed ownership for 1.1 billion euros. In addition to interest in niches such as Science Parks, there is still a lot of investment interest in prime offices. This is apparent from the purchase by UBS of the Aurora building (80 million euros) and the purchase by Aviva Investors of Weesperstraat 420-446 (64.1 million euros).
The relatively low share of residential investment volume (20%) YTD is striking. The investment volume has not been this low in eight years in absolute and relative terms. This is mainly due to the limited investment product and the increase in the transfer tax for investors at the beginning of 2021, from 2% to 8%. As a result, many sales that were planned for 2021, in particular by pension funds, were brought foreward and have taken place in 2020. However, the market is picking up again, albeit without any large portfolio sales. Sales focus more on complexes such as Nieuw Park Leeuwensteijn in Voorburg with 84 units for 35 million euros, or the Willem Boelrestraat in Rotterdam for 19 million euros.
Despite retail sales in brick-and-mortar stores growing in Q3 for the first time in 2021, there is no visible increase in retail space investment volumes. Within the retail sector, food & convenience in particular have become very popular, given the stable growth in turnover. Given the limited supply of these, the investment volume is lagging behind compared to previous years.
Jordy Kleemans, Head of Research & Consultancy at Savills in the Netherlands, summarizes: “Although uncertain times do not seem to be over yet, as reflected by the recently announced strict lockdown, the Dutch real estate market is still standing strong on almost all fronts, despite this uncertainty. In particular, the demand from occupiers and investors for commercial real estate and the housing market appears to be unmoved. Exports are growing, unemployment is falling and producer confidence is at record levels. In addition, the service sector and retail have been less affected by Covid-19 than previously thought. These past achievements inspire confidence in the future.
“The Netherlands also owes this confidence to the fact that it was the first in Europe to reach its pre-Covid-19 economic level. What’s more, forecasts of the Dutch economy are positive, which ensures that both domestic and international occupiers and investors see future opportunities in the Netherlands.”
Looking ahead, Clive Pritchard, Head of Country at Savills in the Netherlands, said : “Due to the positive economic outlook, and the strong fundamentals seen in 2021, interest in residential and logistics real estate is expected to continue and increase in 2022. This applies to demand from both investors and occupiers.
“Based on the further positive economic development and the declining savings index, it is expected that more will be invested in 2022 than in 2021. To summarise, despite the fact that Coronavirus is yet to disappear from our lives completely, we can have confidence in the Dutch property market’s long-term performance.”