Continued yield compression stimulates 'record breaking' investment activity in Dutch real estate market

25 October 2017

According to the report 'Netherlands Market in Minutes - October 2017' published today by international real estate advisor Savills, a number of factors underlie the record breaking investment volumes in the Dutch commercial real estate market.

Currently at € 13,1bn, the 2017 investment volume is already approaching last year’s total volume of € 13,6bn.

Economic fundamentals

The economic fundamentals are stronger than ever. In the second quarter of 2017 the economy saw a growth of 3.3%, only twice this century have we seen growth like this before. These fundamentals are expected to remain strong. In 2018, growth is expected to be 2.5% (source: CPB), which outperforms the average Eurozone growth rate of 1.8%.

 

Liquidity

In addition to the strength of the economic fundamentals compared to surrounding countries, the Netherlands still offers sufficient supply of interesting investment product. Although recent media coverage suggests that supply is drying up, this mainly concerns specific investment categories such as offices at the Amsterdam South Axis. However, less mainstream areas and sectors offer a healthy balance between supply and demand.

 

Expected rental growth and further yield compression

As a result, there remains room for a further compression of yields in virtually all sectors in the Netherlands. In particular, cities outside of Amsterdam are catching up. For example the recent sale of the Kennedytoren in Eindhoven sold to Encore+ with returns of around 6.5%.

 

New kids on the block

The opportunities in the Dutch real estate market keep on attracting new entrants to the market. The Netherlands is clearly on the radar of international investors, the percentage of cross-border investments currently stands at around 65%.

 

Active market

Jan de Quay, Head of Investment at Savills Netherlands, says: "Investors see the profit potential of their investments rapidly increasing, resulting in a lot of activity in the market. Remarkable is the wide diversity of active investors. National private investors, after years of relative silence, have returned to the market, amongst others, because of expanding and broadening banking activities. The fact that this group is active again underlines the fact that the market has fully recovered. "

 

Together, these factors are expected to lead to a commercial real estate investment volume record for the 4th consecutive year. Within the total volume, Savills is seeing a shift in locations and sectors.

 

Jordy Kleemans, Head of Research & Consultancy at Savills Netherlands, concludes: "We see a lot of movement in the market, in every sense of the word."

 

Read the full research report Netherlands Market in Minutes - October 2017.

 
 

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Key Contacts

Jordy Kleemans

Jordy Kleemans

Associate Director
Research

Savills Amsterdam

0031 (0) 20 301 2000

 

Charlotte Harmsen

Charlotte Harmsen

Marketing & PR Officer

Savills Amsterdam

0031 (0) 20 301 2000