A healthy market, but growth is restricted by product scarcity
CBRE: “Real estate investment in the Netherlands is slowing down”
The Dutch real estate market is extremely vital. However, a lack of buildings suitable for investment restricts further growth of the investment market. These are the results of the recent CBRE Mid-Year Outlook.
In the first half of 2019, the total investment volume amounted to € 8.3 billion, a 24% decrease compared to the same period last year. Fewer properties were put on the market, affecting all segments except the residential and healthcare real estate markets. In the housing market, the investment volume was boosted by the Heimstaden transaction, which involved a € 1.4 billion residential portfolio purchase from Round Hill.
Banks are funding less real estate
Another explanation for fewer investments is that major Dutch banks are providing smaller loans for real estate than before. As a result, finding funding has become more challenging, particularly for investments outside the high-end segment.
2019 not a record-setting year
“The decline in real estate investments is in line with our January forecasts. The demand for real estate structurally exceeds the supply. We are expecting a strong second half of 2019, but the total investment volume will be lower than in 2018. 2019 will be a good investment year, but not record-setting.”
Highlights per sector
The office market is healthy. In terms of structural vacancy, various old offices have been renovated and completely transformed. In addition to increasing rental volumes, this has led to low vacancy rates in most cities. The rise in new developments has been slow. In the short term, this means that rents will continue to rise. Amsterdam stands out from other cities with the lowest vacancy rate, highest take-up volume and highest rents. Comparable trends can however also be seen in the other G4 cities and the major cities outside the Randstad area, such as Eindhoven, Den Bosch and Amersfoort.
There is a persistent housing shortage in the major and medium-sized cities, where local (municipal) regulations have an impact on the housing market. New build transactions are delayed due to regulations, lead times for permits and rising construction costs.
The growth of e-commerce and changing consumer behaviour have led to an excess of retail floor area. By 2023, some 25% of all retail floor area will be obsolete. There are specific opportunities for investors and retailers. For a more in-depth analysis of the Dutch retail market, please see CBRE’s "Resetting Retail’.
The vacancy rate for logistics space is at a historic low (3.5%). There is significant demand for distribution centres in centrally-located logistics hubs. The high number of new-build developments has not yet resulted in higher vacancy rates, but it has slowed rent increases. Occupiers are aware of their bargaining power in negotiations with developers and investors, which affects any rent increases.
Healthcare real estate
We are expecting another record-setting year for healthcare real estate. The market is benefiting from demographic trends and changing regulations. Healthcare providers are focusing on their core activities and are selling real estate or outsourcing real estate activities. This creates an even more open market. For an in-depth analysis of the Dutch healthcare real estate market, click here.
The full CBRE Mid-Year Outlook report can be downloaded here. The developments are in line with CBRE’s previous forecasts for the Dutch real estate market as outlined in our annual Real Estate Outlook report.
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.