Record investment volume real estate in final quarter 2020

In 2020, €17.9 billion was invested in real estate in the Netherlands, despite the coronavirus pandemic. That is just a 17.2% decline compared with record-breaking year 2019 (€21.6 billion), a much smaller drop than expected. In fact, 2020 itself broke records in logistics real estate, with an investment volume of €4 billion (up 62.8% from 2019). The hotel and office markets performed significantly less well. These are the findings of a market analysis carried out by global real estate advisor CBRE, published in its yearly Real Estate Market Outlook. The market and the wider economy are expected to recover in 2021, pushing the total investment volume up to approximately €19 billion, an increase of around 6% on the 2020 figure.

• Click here to go straight to the results, conclusions and outlook for each sector.

Why the market has been so resilient

A portion of the real estate market has proven very resilient during the coronavirus crisis. This is partly because the cause of the crisis was an external one this time, rather than an internal one as was the case during the global financial crisis. International investors also continue to have confidence in the Dutch real estate market. Finally, the strong performance of the multifamily and logistics sectors also contributed to the overall result.

Highest volume ever in the final quarter

In the final quarter of 2020, the investment volume reached the highest level ever recorded: €8.6 billion. This was partly due to a peak in multifamily investment, caused by an impending rise in the tax payable on property transfers. Logistics real estate performed very well throughout the year due to the boom in online retail. That made 2020 a record year: €4 billion was invested in this sector, an increase of 62.8% compared to 2019.

Uneven road to recovery

The figures for 2020 varied enormously between sectors. More was invested in logistics while retail, multifamily and healthcare real estate remained roughly unchanged. The hotel market came to a virtual standstill – hotel volume fell by 87.3% compared to 2019. The office market also saw a decline of 47.9% to €3.1 billion. That was mainly due to both tenants and investors adopting a wait-and-see attitude. The sooner organisations can return to their offices, the sooner activity in that sector will resume.

Highlights per sector

The picture varies significantly between sectors, as will the extent and speed of the recovery as we move into 2021. These are the most important findings and forecasts for each sector:

• Traditional lenders have become more selective when it comes to providing real estate finance. However, the gap that remains is quickly being filled by new players. This is creating ever more opportunities to secure finance for higher-risk projects and segments.
• Sustainability has continued to be a priority during the pandemic, and has actually become even more salient. Investors are setting higher sustainability standards, green financing is becoming easier to obtain and interest in sustainable portfolios is growing.
• Investors from the Netherlands and abroad remain very interested in multifamily real estate. We expect affordable rental homes in the Randstad region to continue to be a popular investment product in 2021. In 2020, €7.3 billion was invested in residential properties, 3.5% less than in the previous year. However, with a share of 40.9%, this is still the largest investment category. After a slight dip in early 2021 following a peak in December, activity in the residential investment market will pick up again. The volume is expected to reach around €7 billion again in 2021.
• 2020 was a record-breaking year in logistics real estate, with an investment volume of €4 billion (+62.8%). And due to the growing market share of e-commerce, the sector continues to perform well across all major cities. We therefore expect the volume to reach €4 billion once again in 2021.
• Demand for office real estate in prime locations will remain high in 2021, while excess supply in secondary locations will increase. During the coronavirus crisis, many companies suspended their search for office space temporarily, but they will be back. This resulted in an investment volume of €3.1 billion in 2020, 47.9% less than in 2019. With increasing immunity to coronavirus now in sight, we estimate that around €5 billion will be invested in this sector in 2021.
• Retail real estate had an unexpectedly strong performance, with an investment volume of €2.1 billion in 2020 (+5.6%), driven mainly by the sale of retail properties for daily groceries and smaller shops outside urban centres. In 2021, we expect to see an acceleration in the development of the compact city: city centres that are home to many distinctive retailers and various other functions – such as work and recreation – located in close proximity. Investment volume will be around €1.5 billion in 2021, caused by a shortage of supply.
• The demand for suitable healthcare real estate continues to rise as the Dutch population ages. This makes it an attractive investment. In 2020, €1 billion was invested, around the same as in 2019. We expect to see the same volume in 2021, due to the limited supply available.
• In 2020, investment in hotel real estate fell to just €300 million (-87.3% compared to 2019). However, an effective vaccine could lead to a rapid revival, especially once tourism starts to pick up again. A recovery is therefore likely to begin in the third quarter of 2021 and may continue until 2023. We expect an investment volume of €500-700 million in 2021.