In its quarterly ‘Market in Minutes – The Netherlands’ report, Savills states that the Dutch real estate market faced headwinds in 2023 due to a challenging business climate, leading to both investors and occupiers taking a cautious approach.

Low investment market activity characterised 2023. Investors approached the Dutch real estate market cautiously in 2023, leading to a 57.3% decline in investment volumes. The report notes a potential scenario of "higher for longer" in Dutch real estate yields, reflecting the European Central Bank’s interest rate narrative.

Declining take-up due to a slowdown of the Dutch economy

A challenging business climate in 2023 resulted in a lacklustre year for Dutch real estate. Savills links the economic slowdown to a 25.8% year on year decrease in leasing activity across all sectors.

Wouter van ‘t Grunewold, Market Intelligence Analyst at Savills in the Netherlands, says: “The report draws a parallel between the Business Cycle Tracer and real estate take-up, illustrating a clear correlation between the deteriorating Dutch business climate and declining real estate activity. As the economy approaches the bottom of the current cycle, Savills anticipates a potential recovery akin to historical patterns.”

ESG as the key driver for 2024

Despite economic challenges, occupiers are prioritising sustainability in leasing decisions. Savills expects a resilient demand for ESG-compliant properties, even in financially challenging times, with increased prime rents signalling a tightening in both supply and demand for best-in-class buildings in 2024.

Drawing parallels with the post-Financial Crisis recovery in 2012-2013, Savills anticipates a potential upswing in occupier and investment activity within the next three to nine months, closely aligned with the recovery of the Dutch economy. However, acknowledging global uncertainties, Savills remains vigilant to the potential impact of unexpected worldwide events on the economic outlook and real estate recovery.

Ellen Waals, Head of Agency at Savills in the Netherlands, says: “While the economic slowdown may continue to impact leasing markets in early 2024, Savills is seeing encouraging signs of recovery. ESG-compliant buildings are expected to be consistent performers across all sectors throughout 2024, presenting opportunities for investors.”

Read the full report here.