Negative retail trend halted
Market forecast: CBRE expects surge in retail investments
International real estate advisor CBRE says the investment volume in retail property in the Netherlands is expected to grow significantly, based on economic factors and the current developments in the retail property market and broader real estate market in the Netherlands. The retail user market has suffered its share of bankruptcies but has now turned a corner, and CBRE expects that more investors will soon be willing to start investing in retail properties again. Retail property price levels are relatively favourable compared to prices in the office market and the logistics market and the economic factors underlying the negative trend are now improving. CBRE presents these and other forecasts in its 2017 Real Estate Market Outlook – an overview of and an outlook on the commercial property market – which was released and presented on Thursday 19 January.
The Dutch retail market is in transition. Shopping is increasingly done online, so new consumer trends have started to emerge. This has forced retailers to follow this trend and take the necessary innovative steps to adapt their high-street shops. As a result, 2016 showed a growth in private consumption and retail sales.
Compared to other European markets, the returns in the retail market have been good and investors are optimistic. Macroeconomic forecasts are also looking good. Private consumption has risen by 2.1% and consumer confidence has not been this high in nine years (CPB Netherlands Bureau for Economic Policy Analysis, December 2016). The strong growth in the housing market is one of the main reasons consumer confidence has grown and also serves as an incentive for increased spending. Experts say that a rise in inflation may mitigate this effect to some degree in 2017.
We have noticed that institutional investors are showing great interest in properties at A1 locations where supply is relatively low. Local shopping centres that serve a local catchment area and have a large convenience component, will be of particular interest to investors in 2017. Private equity parties show particular interest in complex transactions that hold little interest to other parties, such as retail properties with shared ownership and high vacancy levels. This type of real estate tends to be favourably priced which allows buyers the opportunity of letting the property and making a profit. The residential rental sector shows an increase in a need for retail properties with a smaller floor space in the wake of a wave of large-scale transactions. Regional and local brands are performing relatively well and many intend to expand with smaller business units.
The Dutch office market will also profit from growing business confidence and the growing job market in 2017. The expectation is that the office-related job market will continue to grow by 1.5% per year until 2020, which is equivalent to an additional 224,000 office jobs in the Netherlands (source: Oxford Economics). 2017 will also be the year of differences in regional markets. Available office space will become particularly scarce in Amsterdam. The city currently has no plans to adjust its restrictive development policy / land allocation policy and as a result of increasing demand in areas where supply is already limited, rent for office spaces is already sharply on the rise. In other cities in the Randstad conurbation, this scenario is less likely as square metres of office space are still available here.
CBRE confirmed that 2016 was a record year with over €13.5 billion invested in Dutch real estate and foreign and domestic capital is still available.
The Netherlands continues to be a safe haven for risk-averse investors thanks to the safe economy and favourable returns. We expect 2017 will be another strong investment year. Investors from Asia will continue to be active and the return of Dutch investors is noteworthy, they will become even more active in the market.
CBRE says that the developments in the commercial real estate market are not entirely risk-free. Although geopolitical events generally do not have an influence on the cycle of the world economy and the real estate market, uncertainty in the countries involved may have a noticeable impact. This could happen in the Netherlands due to the elections in March. Possible risks also include a decreasing supply at the upper end of the market and rising long-term interest rates. Although the difference between the returns made in high-quality real estate and returns on ten-year bonds of stable countries is becoming smaller, it remains considerable from a historical perspective.
On January 19th, CBRE Netherlands presented its 2017 Real Estate Market Outlook that focuses on forecasts for the commercial real estate market in the Netherlands for the upcoming year.
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 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 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.