Savills believes the worst of the downturn in the Dutch real estate investment market is over. The latest Market in Minutes report reveals transactional activity recovered in the first half of 2024, with the outlook for the year's second half encouraging. Stabilised interest rates and growing confidence in the occupier market resulted in a 17.7% year-over-year (Y.O.Y.) increase in investment volumes in H1 2024, reaching €5.3 billion. The retail (+74% Y.O.Y.) and hotel (+101% Y.O.Y.) sectors have led the growth, reflecting improved investor confidence in these asset classes, which have faced challenges over the last years due to the COVID-19 pandemic, high inflation, and a drop in consumer confidence and spending.
Nevertheless, there are few large deals of more than €50 million, like 2023, comprising 32% of the deal volume, whereas in previous years they accounted for at least 40%.
Raymond Frederiks, Market Intelligence Analyst at Savills in the Netherlands, comments: “The volatility in the real estate investment market and the ongoing discrepancies in price expectations between buyers and sellers led to a wait-and-see attitude over the past six months among institutional investors following a core-strategy. On the contrary, for some investors seeking smaller investment volumes this is an opportune moment to focus on assets offering reversionary rental potential or residential properties with the possibility to sell off individual units. This allows for these investors to benefit from relatively low purchase prices.”
The office sector has experienced significant growth in take-up, with a 16.2% increase since H2 2023 and a 44.5% rise since H1 2023. Despite tightness in the labour market and rising labour costs, there is growing interest in office space. On the other hand, the industrial and logistics sector faces challenges due to the sluggish economic environment, with slowed imports, exports, and industrial production. However, these sectors still saw a 9.8% increase in take-up compared to H1 2023, although this is 3.6% lower than the same period in H2 2023.
Savills anticipates a positive second half of 2024 and into 2025 for Dutch real estate, with increased occupier and investment demand. However, the recovery will vary across sectors. Knowledge-intensive sectors face potential headwinds from the Dutch Government’s plans to impose strict limits on student and labour migration, potentially impacting the Netherlands’ growth as a leading knowledge hub. Additionally, mismatches between the price expectations of buyers and sellers are likely to persist throughout 2024. Nonetheless, if the ECB continues to lower interest rates, this should instil greater confidence among investors and support investment activity. Furthermore, investors will closely monitor the strength of underlying occupier market fundamentals, focusing on sectors like the hotel, retail, residential, and light industrial and logistics.
Read the full report here.