Billions have been invested into Continental Europe by Middle Eastern investors over the last three years – £1.45 billion in 2016, £2.75 billion in 2017 and £1.97 billion in 2018 – as the region is seen as a safe haven for investment, with real estate offering steady returns.
In terms of markets, the main focus for these investors over the last two years has, and continues to be, Germany.
However, the strong competition for German assets is driving some investors to consider options in the Netherlands, where there is a perception of finding value as the returns are slightly better. In 2018, more than £563 million was invested in the Netherlands by Middle Eastern investors, the highest figure of the last 10 years.
Middle Eastern investment into the Netherlands
In terms of asset classes, offices and hotels continue to attract, with a private family office from the Middle East buying the MM25 office building in Rotterdam for an undisclosed price from OVG Real Estate in the summer of 2018.
One of the first deals involving Middle Eastern money this year was Dura Vermeer’s sale of the DuPont development in Leiden Bio Science Park to Rasmala Investment Bank, with Savills advising. The transaction comprised a total lettable floor area of some 6,588 sq m, divided into approximately 4,001 sq m laboratory space and 2,587 sq m office space and 108 parking spaces. The property is fully let to Genencor International BV, a subsidiary of American chemical group DuPont and is scheduled for completion in Q2 2020.
One of the key attractions of the Dutch market is the strong performance of the country’s economy, which has now shown uninterrupted growth for 17 consecutive quarters, implying a trend break with the standard real estate cycle of around seven years. An ‘extended’ cycle is now certain and there are even signs that point to a double cycle.
At the same time, yields remain under pressure due to high demand but they are starting to bottom out. Middle Eastern (and other) investors see rental growth as a particularly positive reason to continue investing in Dutch real estate at historically high price levels.
Traditionally, real estate continues to be the ideal ‘inflation hedge’ and, based on current inflation expectations, this will remain the case throughout 2019. As a result, we expect Middle Eastern investors to continue to ‘go Dutch’ if they find the right product in the right place at the right price.