Investments in real estate fall by 16%

The investment volume in the real estate market amounted to € 6.9 billion in the last six months, a fall of 16% compared to the first half of 2019 (€ 8.3 billion). Although this is a significant fall, the impact of the COVID-19 pandemic appears to be less than previously predicted. According to its most recent forecast, advisor CBRE expects to see a fall in the investment volume of between 25-35% for the whole of 2020.

Compared to the financial crisis, the real estate market is now in a much better position, ensuring foreign investors maintain their confidence in the Dutch real estate market: their share of the investment market hardly fell at all in the first months of the crisis. The reasons for this include the greater spread of investment opportunities across the real estate sectors and the ready availability of capital. This according to CBRE in its Mid-Year Market Outlook.

Fall in investment volume predicted for 2020

In the last six months, the investment volume fell by 16% compared to the same period in 2019. Although this is only a limited decline, the percentage for the whole of 2020 could be slightly higher. “The first half of 2019 saw only moderate performance, followed by a very strong fourth quarter. This year, we are very unlikely to match such a strong fourth quarter. Besides, the first half of 2020 also included 2.5 months without coronavirus, which is why the fall in the first six months amounted to ‘only’ 16%. The whole of the second half of 2020 will be influenced by coronavirus. We therefore expect to see a fall of 25-35% for the whole of 2020, which is equal to a total volume of € 14 to € 16 billion compared to € 21.6 billion last year. This is a positive adjustment – at the start of the coronavirus outbreak, we were predicting a fall of 30-40%,” says Bart Verhelst, Executive Director, Capital Markets at CBRE.

Foreign investors remain confident in Dutch real estate market

The real estate market appears better able to withstand a crisis than it was in 2008, when the largest sector, the offices market, was hit hard. There are important fundamental differences that explain the limited impact now. During the financial crisis, foreign investors withdrew, leaving only the Dutch players. The proportion of capital from abroad fell from 41% just before the financial crisis in 2007 to just 22% during the financial crisis. This time, there is no sign of a similar withdrawal and the share of foreign capital remains virtually unchanged: 60% in 2019 compared to 58% in the last six months.

More diversity in investments

Another key difference that is boosting the resilience of the real estate market is the fact that investments are spread more evenly across the different sectors. In 2007, the office market was the dominant sector, accounting for 68% of real estate investments. In 2008, that figure was just 40% and continued to fall in the ensuing years to reach 18% by 2020. On the other hand, the residential sector has enjoyed strong growth. This amounted to 9% in 2007 and 2008 but in 2019 it accounted for 35% of all investments and as much as 46% in the first half of 2020. Other sectors have also seen more investor interest in recent years, such as healthcare real estate and industrial and logistical real estate. This increased spread has improved the stability of the real estate investment market.

“Housing, logistics and healthcare real estate have enjoyed particular growth in recent years. The move towards these sectors is being driven by structural growth in the Dutch population and economy. The demand for increasingly higher quality real estate is set to increase as a result, maintaining growth in these investment sectors. Even with the current shift to less volatile sectors, we still expect a persistently higher investment volume than in 2008,” says Erik Langens, Executive Director Capital Markets at CBRE.

Read more about the current status and expectations for the real estate investment market and different real estate sectors: download report.