CBRE: “Current real estate peak has healthier basis than previous peak in 2007”
The current investment peak (2015-present) in the Dutch real estate market has a healthier basis than the previous property boom (2005-2007). This is partly due to the fact that the financing conditions for real estate have been tightened up in recent years. As a result, purchases now involve lower debt ratios. In addition, investors (including foreign investors) have invested in new sectors, such as hotels, healthcare real estate, and residential properties, in addition to ‘traditional’ sectors such as offices, retail and logistics. This is one of the main conclusions in CBRE’s Real Estate Market Outlook report, which this international real estate advisor published today.
The record investment volume of over €19.5 billion meant that 2017 was an extremely good year for the real estate sector. The figure for 2016 was €14 billion. That is an increase of 41%. Given current levels of interest among investors, economic growth of 2.2% and low unemployment rates, real estate advisor CBRE expects that 2018 will also be a good year for the sector.
"We continue to see evidence of a growing interest in Dutch real estate by market players from all parts of the world. One positive aspect of the current real estate boom is that it is taking place in a much healthier market. Thus, we anticipate the risk of price falls during any future downturns (cyclical or otherwise) will be much smaller than in the past."
The report also highlights changes in investors’ attitudes and behaviour when purchasing real estate.
"Investors are now more critical when purchasing buildings or real estate portfolios. To date, they have focused on prime properties, preferably in economic core areas like Amsterdam. This kind of real estate has become very scarce. For this reason, I believe we have now reached a tipping point. In 2018, there will be increased interest in secondary real estate and in other major cities, such as Utrecht, The Hague and Rotterdam. That is a very favourable development."
The report also shows that Dutch real estate is attracting investors from a growing number of foreign countries. In addition to ‘familiar’ investors from the US, the United Kingdom and Germany, investors from France, China, Israel, Belgium, Canada, South Korea and Singapore are increasingly investing in Dutch buildings (including office buildings) or real estate portfolios. In 2017, 70% of real estate purchases involved foreign investors. Only 30% of the available property was purchased by Dutch investors.
However, the degree of internationalisation varies substantially from one real estate sector to another. Dutch offices and logistic buildings were already popular with foreign investors during the previous real estate peak. At that time, these properties represented about half of the investment volume but, during the current period, these shares have risen to 71% and 78% respectively. By contrast, during the previous peak, residential and retail properties were almost exclusively purchased by Dutch investors. Yet here too, foreign activity has increased - to 29% and 59% respectively.
For more information visit www.cbre.nl/outlook2018.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.