Rotterdam seeking new balance in office market
In the years to come, Rotterdam wants to continue to develop from a typical port and industrial city to a port and knowledge city. By focusing on education, housing, gentrification and tourism, it aims to boost the knowledge economy and attract workers and organisations from the creative sector. The office market also plays an important part in achieving the city's objectives. In its publication Rotterdam; The Property Perspective, CBRE analyses and interprets the most important trends in the Rotterdam office market.
Rotterdam has more than 3.2 million sq m of office space, 80% of which is in the rented sector. The past few years have seen a considerable rise in office take-up by organisations in the technology, creative and business services sector. This is a step in the right direction when the aim is to create a broader economic basis. CBRE has seen an annual rise in the take-up of office space since 2013, with a peak of more than 170,000 sq m in 2015. Companies from the business services sector had an above-average share in this, with a take-up of 80,000 sq m, or 46%. The international real estate advisor expects a stable growth in comparison with the long-term average.
In addition to the effect of the large take-up volume of serviced offices, a large number of leases will expire this year and in the period up to 2020. Some of these tenants will renew their contract, which will not affect the uptake volume. However, many will reconsider their accommodation. Given the current vacancy rate, the generally outdated office stock and the demand for a different type of office space, the ball is now in the court of real estate owners and the municipality. They will have to continue to make major investments in order to retain and attract tenants. Transformation and renovation at good locations are essential in this respect. Rotterdam Central Business District, Kop van Zuid and Alexandrium in particular will grow in popularity among tenants because of their accessibility and multifunctional character.
Opportunities for investors
Investors find that transformations and renovations are increasingly feasible, as the book value of empty offices has generally decreased after several crisis years, and the demand for accommodation is rising now that the economy is improving. Investors can stand out in the Rotterdam office market by creating a more suitable and modern supply for occupiers and improving the sustainability of their buildings.
Investors are showing a new interest in the city. In comparison with the other G4 cities, Rotterdam took second place with an investment volume of about €370 million; at the beginning of 2016 it even came first. The latter was the direct result of the sale of the "De Rotterdam" building by Rabo Vastgoedgroep to a consortium of Korean investors, represented by Amundi Real Estate. In addition to this transaction, quite a few other characteristic Rotterdam office buildings have changed hands over the past few years, including FIRST, Central Post, Beurs-WTC and Maastoren.
The city of Rotterdam and various market operators are facing a number of challenges and opportunities. If they focus even more on transformation and continue to give the existing office stock a quality boost, the city will offer interesting opportunities for investors and (future) tenants, who can profit from favourable rents. The balance will then be restored, and rental growth will become possible again for investors.
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.