Last quarter of 2022 was worst investment quarter for real estate market since 2014

In the fourth quarter of 2022, 4.2 billion euros was invested in commercial real estate in the Netherlands. A decrease of 40% compared to the same quarter in 2021. This is based on the figures from CBRE Netherlands, which is part of the listed CBRE Group, the world's largest real estate consultancy. Since the last quarter of 2014, the end of the financial crisis, the investment volume in the real estate market has not been this low. Over the whole of 2022, the investment volume decreased by almost 5% compared to 2021 and amounted to 16.4 billion. For the coming year, CBRE expects to reach an investment volume of 13.7 billion euros, a decrease of more than 16.2% compared to 2022.

There are sectoral differences. Activities in the residential investment market fell sharply last year with a 10% drop in the investment volume. Not only did the housing market have to cope with higher financing interest rates, but the proposed plans for rent regulation have also considerably changed the dynamics of the market in the second half of the year. The impact of this is reflected in the investment volume compared to the long-term average, which is 46% lower. The investment market for offices also fell sharply (-12%). However, this was entirely caused by the higher financing interest rate, as a result of which prices on the office market decreased sharply after the summer and various transactions fell through.

Real estate values

Due to rising interest rates, CBRE is seeing the value of real estate investments fall across the whole span of the market for the first time since 2013. Commercial real estate prices have fallen by 5% to 30% over the past year.

Again, there are differences between the various sectors. The strongest price decreases occurred in offices, logistics and – to a lesser extent – ​​homes. Before the rate rise, initial yields in these sectors were extremely low (around 3%). As a result, a limited interest rate increase already impacts price formation. This creates a certain leverage effect in the price change.

Transactions

In addition to the decline in investment volume and property value, the number of transactions also fell sharply in the past quarter. Erik Langens, executive director Capital Markets at CBRE, about the transactions: “The largest drop in the number of properties traded is particularly noticeable in buildings with a price above 20 million euros. These projects are more dependent on external financing, which means that the rising interest rate has a greater impact on the decision whether or not to buy a building.” In the last three months, the dynamics for these types of traded properties were 49% lower compared to the previous three years.